HK unveils next official controversy

During 2009-2011, Hong Kong endured a debate on a proposed minimum wage. In an attempt to deflect pressure for a legal pay floor, officials had encouraged an embarrassing voluntary ‘wage protection movement’, which to no-one’s surprise low-margin employers of menial labour ignored. As unions and activists demanded action, lawmakers representing corporate interests predicted mass-firings of unskilled workers, then demanded that the minimum be set at sub-starvation levels that would retain the status quo in practice. Pious free-market types decried the sacrilege of state intervention in the libertarian paradise that was the Big Lychee. The government sought to contrive obscure categories of local workers who would be exempt from the new law, to make it look as if foreign domestic helpers – who were never going to be included – weren’t being singled out.

After much bickering, a minimum wage took effect at a level arrived at through lots of consultation, consensus and harmony. At HK$28 an hour, it is a fraction of its counterparts in many countries with comparable per-capita GDPs and an admission that a chunk of Hong Kong’s work force are living in a Third World economy, albeit often with near-free housing and medical care. Rather than reduce demand for labour, as basic economics would expect, the compulsory higher wages actually attracted underemployed and voluntarily idle people back into work, increasing employment levels. Employers seem to have adapted, almost certainly by passing on at least some extra costs to customers and extracting better deals from suppliers.

Apart from the prospect of regular adjustments to reflect inflation (or maybe one day deflation), the excitement is all over. But anyone nostalgic for the debate, for the struggle for oppressed workers’ rights and for the amusement of seeing some fairly repellent politicians and lobbies not getting their way can now look forward to the next big controversy: official standard working hours.

In theory, Hong Kong’s downtrodden proletariat has little chance of success. Their excuse for a movement is divided into two rival blocs. One is susceptible to persuasion and manipulation by pro-Beijing United Front forces that value the loyalty of capitalists more than that of the masses. The other is itself split between moderates and radicals who don’t always get on. However, the workers can always rely on representatives of employers’ interests to inadvertently come to their help. The bosses spokesmen could make measured and valid points about the potential administrative problems with working-hours laws. Instead, predictably, they start the process off by issuing dire warnings that are clearly exaggerated, if not stupid.

Stanley Lau Chin-ho of the Federation of Hong Kong Industries forecasts Greece-style riots and unrest if statutory hours are introduced. It is a strange argument, because half-failed European economies like Greece are trying to change the law to allow employers to make staff work longer hours – the opposite of what Hong Kong is set to do. It sounds as if he thinks the very mention of the subject will provoke civil disorder. But presumably his logic is the slippery-slope one; go down the regulated-hours road, and one day we will be like the European countries with so much protection for workers that business ceases.

Even that argument is pretty unconvincing in Hong Kong. The introduction of a 35-hour week in France was intended to reduce unemployment, which had at least partly resulted from laws making it so hard to lay off employees that companies would stop expanding in order to avoid hiring more help. The idea was that by limiting working hours, work would be shared out among a larger number of people – an economically illiterate concept surprisingly popular in some quarters.

None of this has much relevance in Hong Kong. Proposals to give employees iron-plated job security as in France and other parts of Europe would be a danger – but most people only have to look at our very low unemployment rates to see the benefits of labour market flexibility. The problem in Hong Kong is that employers in low-value industries, struggling to pay rents and naturally desiring a decent profit, compete purely by squeezing and sweating their unskilled workers. The business sector itself, going back a while, helped create the conditions for this by lobbying for plentiful immigration from the Mainland.

The experience of the minimum wage suggests that when minimum standards are imposed to prevent rank exploitation, wealth is redistributed downwards as business owners, customers and suppliers all chip in to cover the extra costs. There might be some unintentional cross-subsidy among the low-paid, but it seems the benefits have outweighed any ill-effects.

If the labour unions wanted to speed up working-hours legislation, they would talk about the unevenness of the whole playing field rather than just bleating about how bad conditions are. They should say that bosses who are too backward to upgrade equipment or train staff to boost productivity and landlords who ramp up rents at every opportunity are getting too big a slice of the pie. Standard working hours – like the minimum wage – would force them and the better-off rest of the community to share out the goodies more fairly. (Then you come out with the tear-jerking stories about Mr Chan’s 70-hour weeks with no overtime.) But the labour activists probably won’t play it that way. Then again, it won’t matter: the employers’ lobby will shoot themselves in the foot just fine.