Minimum wage abatement

The day gets off to a good start with hapless Labour Secretary Matthew Cheung sounding like an idiot on RTHK Radio 3 trying to defend the rule that old folk who have retired to the mainland must trudge back to the Big Lychee every so often to remain eligible for their monthly HK$1,000 old-age allowance. The interviewer asked him point-blank why the government didn’t simply scrap the requirement, which the Federation of Trade Unions exploits mercilessly via tear-jerking publicity stunts involving frail old folk in wheelchairs.

To hear him tell it, this would be the most unimaginably radical and far-reaching policy upheaval in the whole of Greater China since 1949. What he means is that, owing to the dreaded ‘aging population’, the distribution of a thousand bucks a month each to a few more elderly poses a theoretical long-term threat to such public expenditure areas as pointless infrastructure mega-projects and senior officials’ life-time HK$200,000-plus free monthly retirement pensions.

Cheung may be forgiven for talking gibberish right now because he is simultaneously under attack from all directions on the issue of the minimum wage.

On the side of righteousness, of course, we have all the usual labour and grassroots people taking full advantage of Hong Kong’s new-found hatred of tycoons and savaging any business trying to defend its bottom line. Fast-food chain Café de Coral had to climb down after scrapping paid meal breaks for staff ahead of the new (probably HK$28-per-hour) floor. Feeling finger lickin’ good, the activists are now leaping on KFC, who did something similar to their then-HK$16-18-per-hour minions a few months back. With the whiff of revolution in the air (and this is proving to be the most interesting year in this city since 2003), Cheung and colleagues are no doubt desperately lobbying low-margin firms to bite the bullet and pay a bit more.

In all fairness, a lawyer - thus paid to say this stuff

On the other side, there are such bodies as the Employers’ Federation of Hong Kong representing the interests of companies that can apparently survive only by paying wages below the poverty line.  I had never heard of EFHK member Duncan Abate, but apparently he is one of the Top 25 Labour & Employment experts in the whole world, and he denounces the minimum wage as “a very intrusive piece of legislation that warps the balance between supply and demand and creates unemployment.”

If anything warps the balance between supply and demand and creates unemployment it is Hong Kong’s high land-price policy.  Like so many other economic activities in the Big Lychee, the fast-food industry is ultimately a revenue-generator for landlords. Lower rents would easily compensate for higher pay for unskilled staff, but for some reason opponents of a minimum wage are silent on this element of business costs. (In the Wall Street Journal article, restaurant association boss Simon Wong admits that rising food prices are also a bigger worry than wages.)

The real scandal is that Hong Kong’s post-1997 leaders have allowed economic distortions to increase to such an extent that we are now forced to abandon our free-market principles to get back to some sort of balance. Before the handover, the government was reasonably adept at turning down not only workers’ but tycoons’ demands for favours (see Goodstadt). Since then, we have seen an explosion of privileges extended to the property cartel (reduced land supply, free extra gross floor areas, easier compulsory purchase of old buildings, etc) while the traditional official abhorrence of social welfare has remained intact.

The reasons for this are unclear. It could be related to an obvious bias among out-of-depth, panicky policymakers towards more interventionist government. My theory is that Beijing has ordered the post-1997 Hong Kong administration to swaddle the family-run real-estate giants in huge, easy profit margins as payback for their shift of loyalties – and promises to stay in the city to ‘keep it rich’ – in the 1980s. No other explanation makes sense to me, but then I’m not one of the Top 25 Labour & Employment experts in the world. Whatever the reason, the minimum wage suggests the distortions and imbalances have reached their limits. A retreat on old-age allowance is no doubt on the way.

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10 Responses to Minimum wage abatement

  1. Maugrim says:

    I’m not so sure about the payback theory, its possible, but then again, it’s HK remember, where ties are far more incestuous than would be the case elsewhere. The rents issue is just adding another log to the fire. I think most people know of the rents being charged for shops etc, are fully aware of the income disparity that is developing in HK and are starting to get bolshie about it. It will be interesting to watch. Mind you, a growing Hang Seng index will keep most people’s eyes on making money (and then losing it).

  2. Vile Traveller says:

    I should point out that government pensions are not necessarily “retirement” pensions, as they can draw them while continuing to work elsewhere, say, for a property developer or some such. More like a monthly golden handshake for life.

  3. Poltergeist says:

    I’ve been trying to find statistics on how many HK civil servants currently earn a monthly base salary of HK$100,000 or more. Anyone know where I can find this info?

  4. Maugrim says:

    Poltergeist, if you get the percentages, I’d be curious to know. Lower level functionaries are on the MPS: http://www.csb.gov.hk/english/admin/pay/42.html

  5. David Webb says:

    and unlike fruit money, retired civil servants don’t have to stay in HK to claim their pensions.

    “the traditional official abhorrence of social welfare has remained intact” – is that really true? “One-off” annual waivers of public housing rentals, upping the fruit money to $1000/m without means testing the over-70s, subsidies for transport, subsidies for internet connection, waivers of rates, subsidies for electricity…

  6. lefty says:

    Of course none of this would have happened if they’d managed to control that pesky internet thingie, something our friends up North are just beginning to realise. News travels fast in both directions. Unfortunately our beloved property tycoons didn’t realise this might be their nemesis when they rushed into the dotcom business ten years ago!

  7. Doctor Doppleganger says:

    Dang it!! This blog knocks a big hole in my theory that Hemlock was Duncan Abate ….

  8. Dr. Lozenge says:

    And I thought Hemlock was Matthew Cheung….

  9. David, I’d say that most of the items on your list (subsidies for transport, internet, and electricity) are direct handouts to the tycoons that run the transport, internet and electricity oligopolies.

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