The minimum wage debate p1

After years of wrangling, Hong Kong is ready to enforce a minimum wage. But who are the real winners and losers? Time Out speaks to the people it will affect the most. Photography byCalvin Sit

The world’s freest economy is about to become a little less free. On 1 May, Hong Kong’s first minimum wage law will come into effect, introducing a pay floor of $28 per hour that will affect hundreds of thousands of workers and employers directly – and potentially the rest of the population as well.

In recent years, this controversial policy has dominated the headlines. The status of domestic helpers, lunch breaks, and the determination of the wage minimum (the rate of $28 was only confirmed in January this year) have all taken centre stage, as has the inevitable scaremongering about the economic impacts of the law.

Critics speak of widespread redundancies and inflation, while advocates point to the need to ensure that individuals are not being paid excessively low wages. However, it is almost universally agreed that this ordinance will change the city’s labour landscape forever.

But beyond the endless theorising, rhetoric and economic analysis, the real impact of the new Minimum Wage Ordinance is ultimately seen on people: the plethora of employees that currently earn less than $28 per hour, as well as the many employers, from the heads of multinational conglomerates to corner store keepers, that retain them. We talked to people from across the socio-economic spectrum to see how they will be affected in this brave new world.

THE CLEANER

Fakhum Yuphin is a cleaner at Li Hing Cleaning Services Company. She works 11 hours a day at Luard Road Refuse Collection Point, Wan Chai, from 6.30am to 5.30pm, which includes a one hour unpaid lunch break. She has four days off a month, which are also unpaid.
Her current hourly wage is $25.60, which amounts to around $6,656 per month, and in order to supplement her income she also does other cleaning jobs at night, usually from 6pm to 10pm. Under the new minimum wage laws, her salary will see a 9 per cent increase to $7,280 per month.

“That’s good, but still not enough for me,” says Yuphin. “I have to pay $3,000 a month for rent. Food is expensive. Transportation is expensive, and I have to hire someone to look after my son. He’s only four and I have no time to take care of him.” Yuphin thinks an hourly wage of $30-$32, working for eight hours per day, would be a better situation, allowing her to give up her second job and spend more time taking care of her family. She also wants her lunch break and rest days to be paid. “Sometimes they ask me to work during my lunch time,” she says. “I don’t have to work because it’s unpaid, but I don’t want them to fire me because I don’t listen to them.”

For Yuphin, while she will be earning more under the new law, she is also already feeling some of the negative effects: “Now restaurants are raising prices. They know we’re earning more, so they think it is okay to charge us more now.” Increasing prices are not the only thing that Yuphin is concerned about. She thinks many people are worried about becoming unemployed, following the new minimum wage policy. 

Shirley Zhao

THE CLEANING COMPANY

Mickey Yan Wai-kiu is the managing director of Li Hing Cleaning Services, the company that employs Fakhum Yuphin (see The Cleaner, above), as well as around 2,000 other employees. Eighty per cent of his workers are outsourced to government departments.

According to Yan, who is also the chairperson of the Tendering Principle Sub-Committee of Environmental Contractors Management Association, the majority of his employees currently earn between $24 and $27 per hour, meaning they will be affected by the new law.

With such a large number of employees, there will obviously be a significant impact on the company’s wage bill. While he couldn’t provide Time Out with any concrete figures, Yan estimates that it will increase by between 25 and 50 per cent. But perhaps a little surprisingly, Yan is hardly fazed by the new minimum wage requirements. “We can charge the customers more,” he says. “It would cover the extra payment.”

The minimum wage law also has several other spin-off effects for employers. For Yan, the biggest concern facing many small- and medium-sized companies relates to the increased Long Service Payments (LSP) that will result. By law, employees in service for more than five years are owed a payment when they retire or when their contracts end without renewal. This payment is calculated with reference to both final monthly wage and years of service.

Says Yan: “We hope the government can allow us to pay off the Long Service Payment before 1 May without ending the contracts with our employees, and start a new round of accumulation of LSP after 1 May, but the government hasn’t given us any response.”

SMALL RESTAURANTS

One might imagine that small businesses would be the hardest hit by the minimum wage law. But according to Tony Lam, the owner of a small Wan Chai dessert restaurant, it will only make them more competitive against big companies.

“The minimum wage can provide a standard for workers to choose between big corporations and small restaurants,” says Lam. Many large hospitality corporations offer wages lower than the minimum wage level, or just slightly above, with meal breaks and rest days unpaid; whereas smaller restaurants often pay much higher wages. Under such a comparison, many employees may prefer to work for the small restaurants.

“I hire six workers here. I pay them $30 to $40 per hour, and I always pay their meal breaks and rest days. That’s how it works among us [small restaurants],” says Lam. “But many elderly people who want to enjoy more benefits like retirement plans would probably still prefer to work for big corporations; we usually don’t provide these.”

However, Lam’s view is not shared by all small restaurant owners. Mr Chiu, the owner of a dim sum restaurant on Mong Kok’s Tung Choi Street, worries that new hands may become much less competitive in the job market. “I used to hire part-time workers at a lower wage but now I’d rather hire a full-time experienced worker, because I can’t afford to pay someone with no experience $28 an hour,” he says. “No one would pay a newbie that high, and the situation means experienced workers are more difficult to hire, and no one wants to hire new hands.”

Shirley Zhao

THE KITCHEN STAFF

A 49-year-old mother-of-six and the only bread-winner in her family, Ms Ho works 10 hours every day at a branch of chain restaurant Fairwood in Tuen Mun. Her monthly salary is $5,800, averaging out to a wage of $22 per hour. “I dare not think about the budget each month. I don’t have enough money to feed my family, let alone have any savings,” she says. “A few days ago was my birthday; I didn’t even celebrate it.”

After the implementation of the minimum wage, the restaurant may shorten her working hours to nine per day. “The restaurant hasn’t confirmed it yet,” she said. “I just heard from some inside sources.”

If the rumours prove to be true, Ho’s monthly salary would increase to $6,552. But even if her working hours are shortened, Ho is fine with that. “Anyway, my salary will be higher,” she says, “and I feel happy and somewhat relieved. I can buy a lot more food and let my family live easier.”
However, she was concerned about inflation, saying the minimum wage is not enough. “Prices are crazy these days. Before, pork ribs were $24 dollars per catty; now they are $46,” she says. “I think a rise to $35 an hour can equalise the rise of prices. $28 an hour will neither starve you to death nor make you full and warm.”

Suzanne Wu Sui-shan, organising secretary of the Catering and Hotel Industries Employees’ General Union, said the setting of a minimum wage means a “significant raise” of the wages of most workers at large chain restaurants such as McDonald’s, KFC, Café de Coral, Fairwood and Maxim’s. According to Wu, these workers’ wages usually average $22.6 per hour. “Many workers are looking forward to the implementation of the minimum wage,” she said, “because they haven’t seen a rise of their wages for a long, long time, and such a rise can help them deal with the inflation.” Time Out contacted Café de Coral, Maxim’s and Fairwood for comment, but none wished to comment on the issue.

Shirley Zhao

JUGGLING THE ECONOMICS

Throughout this feature, you will have heard a lot about how the minimum wage will affect the economy. But how will Hong Kong’s financial future be shaped by this change?

“The main benefits are narrowing social frictions, and making people on low pay feel that they’re being more respected,” says Duncan Innes-Ker, Analysis and Senior Economist at Economic Intelligence Unit – China, and a specialist in Hong Kong’s economy. “The negatives are some jobs will be lost. There’s always lost jobs with minimum wage laws.”

Most economists agree with Innes-Ker, in that a minimum wage will necessarily lead to higher unemployment. According to the latest Annual Earnings and Hours Survey conducted by the Census and Statistics Department, the new minimum wage rate will affect an estimated 314,600 employees; but how many will lose their jobs due to rising labour costs?

“I don’t think, in practical terms, it will have a dramatic impact on unemployment,” says Inner-Ker. The Provisional Minimum Wage Commission (PMWC), appointed by the Labour Department to recommend a minimum wage rate, estimates that losses will be “relatively mild,” at less than 50,000 jobs.

The precise numbers, however, may never be clear, particularly with the current booming state of the economy. This surge, according to Innes-Ker, should reduce the impact on low-skill workers: “If security guards are being laid off, they may be able to find other jobs in this economy that they might not have in a tougher climate.”

So, what about inflation? “In theory, it would have an upward impact on inflation by pushing up wages,” says Innes-Ker. However, he thinks that, at a $28 level, it will be negligible. “The things that really drive Hong Kong’s inflation are rent, property sector prices and food prices, none of which are really closely related to minimum wage,” he states. Largely in agreement, the PMWC estimates less than a 0.4 per cent increase in Hong Kong’s Consumer Price Index, which it regards as a mild impact.

Steven Hsieh

                   

A SUMMARY GUIDE

The wage
The statutory minimum wage law entitles all employees to an hourly wage of at least $28.

Why it was enacted
The Labour Department indicates that the Minimum Wage Ordinance is aimed at “striking an appropriate balance between forestalling excessively low wages and minimising the loss of low-paid jobs while sustaining Hong Kong’s economic growth and competitiveness.”

Who it affects
The law covers almost all workers in Hong Kong and, of particular importance, will benefit those who currently earn less than $28 per hour. There are an estimated 314,600 people, or 11.3 per cent of Hong Kong’s workforce, who fall into this category.

Who is ineligible
Domestic helpers and student interns are not eligible to a minimum wage.

The starting date
The statutory minimum wage comes into effect on 1 May 2011.

Meal breaks
The Minimum Wage Ordinance does not require employers to provide paid meal breaks or rest days. The Labour Department’s recently released document Statutory Minimum Wage: Reference Guidelines for Employers and Employees indicates that payment for meal breaks and rest days is a matter to be agreed between the employer and employee on an individual basis.

The future
The Minimum Wage Commission is responsible for reviewing the rate and recommending any changes at least once every two years. The $28 rate can, and probably will, change at some point in the future.

Want to know more?
Contact the Labour Department, the agency responsible for enforcement of the Minimum Wage Ordnance. See www.labour.gov.hk for contact details.

Steven Hsieh

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INELIGIBLE DOMESTIC WORKERS

Sheilla Esdrade is a domestic worker for a family of five, including three children. She’s a staple in the home – the preparer of meals, buyer of groceries, reader of bedtime stories, and so on. But to Esdrade’s dismay, the minimum wage law does not cover her line of work.
“It’s unfair, and it’s discrimination, because we deserve the same rights as other workers,” says Esdrade, a Filipino immigrant who has worked in Hong Kong for 24 years.

When she’s not homemaking, Esdrade fights for her colleagues’ rights as the chairperson for the Overseas Domestic Workers’ Union. The union believes foreign domestic workers, of which there are at least 200,000 in the territory, should receive the same $28 hourly wage as everyone else. The Legislative Council, however, believes otherwise.

When the Minimum Wage Bill was introduced into LegCo in mid-2009, domestic workers were specifically excluded from its scope. The LegCo Brief accompanying the bill stated, among other things, that domestic workers’ round-the-clock working hours made paying by the hour impractical. But Esdrade’s union says as long as workers maintain eight hours of rest a day, then recording when they work shouldn’t be a problem. “They’re just making excuses,” she says.

The “excuses” don’t end there. The LegCo Brief also noted that domestic workers receive benefits tied to the nature of their work, including free food and accommodation, and contended that paying domestic workers by the hour could result in a disastrous socio-economic spiral in which one of the working spouses would have to leave the workforce to look after the home. It also pointed to the long-established minimum allowable wage for foreign domestic helpers, which currently stands at $3,580 per month.

Esdrade remains unconvinced by these reasons. “We’re human too,” she says. “Domestic work should be recognised as work as well.”

Steven Hsieh

THE SECURITY OFFICER

“I can’t complain,” says a security guard of Efficient Property Management Company. “If you don’t like it, you don’t have to sign the new contract.” The guard, who did not want to be named for fear of losing his job, is one of thousands of property guards who will benefit from the minimum wage. He currently earns $6,000 a month, working six 12-hour days a week. Including paid meal breaks and rest days, his wage translates to around $17 an hour. Under his new contract, his monthly salary will rise to $8,000 for 11 working hours per day, but his meal breaks and rest days will not be paid. That equates to around $31 per hour.

“I’m 60 now; I don’t have choices,” he says. “At least they will pay higher, and I can buy one more vegetable when I go to the market.” 
However, despite the increase in his wage, he says he still needs more cash in the pocket. “My wife doesn’t have a job and I have to raise the whole family,” he states, adding that his 17-year-old daughter is about to enter higher education. He is also upset about lunch hours and rest days remaining unpaid. “I don’t understand why the government does not make it clear that these should be paid,” he says.

Lee Lok-ting, executive secretary of Hong Kong Buildings Management and Security Workers General Union, said they are negotiating with the company to reclaim paid meal breaks and rest days. “There are many grey zones in the laws and the companies can take advantage of them to cut their employees’ benefits,” says Lee. “As long as the government hasn’t made any move, we can’t do much either.”

Another benefit that has been seized relates to Long Service Payments (LSP). Last month, property company New City Property Management sacked 200 security guards while their wages were still low, told them to sign contracts with a security outsourcing company, and rehired them as contract workers, so it would not have to pay them Long Service Payments at a higher wage. The same occurred to our anonymous security guard. Says he: “We now have zero years of service.”

Shirley Zhao

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