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Hong Kong economy
OpinionHong Kong Opinion
Paul Yip
Paul Yip

Opinion | Hong Kong’s minimum wage increase should be stepping stone in fight against poverty

  • Hong Kong’s new minimum wage formula is a win-win for employers and employees and shows the city is finally taking action to support low-income workers
  • Contractors and subcontractors must also be held accountable to protect the rights of outsourced workers and prevent accidents on the job

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A cashier works in a supermarket in Lok Fu on April 29. The government is adopting a new formula for calculating the minimum wage which takes into account the consumer price index. Photo: Jelly Tse
Paul Yip
To set the minimum wage, the Hong Kong government is adopting a new mechanism based on a formula which uses the latest consumer price index (A), as well as 20 per cent of the difference between current gross domestic product growth and average GDP growth over the past 10 years, subject to a cap of 1 percentage point.
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The new formula has several advantages. It does away with the need to spend resources on collecting data or expend time on debates in the Minimum Wage Commission. The formula provides an objective and efficient way to set the minimum wage. It also strikes a balance so low-income earners can share the benefits of economic growth and have a safety net during economic downturns.

The minimum wage was introduced in 2011 with the initial rate set at HK$28 (US$3.58) an hour. Since May last year, it has been HK$40. There has been concern about what impact the new formula will have on business operating costs.

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Based on my calculation, if the formula had been adopted in 2011, the minimum wage would be about HK$41.7 an hour in 2024, only slightly higher than the current one. The minimum wage that comes into effect using the new formula will be a bit higher than what it would have been had the wage been calculated using the new formula from 2011 onwards, as it will be annually adjusted.

I have yet to learn of any convincing argument for why the minimum wage should only be reviewed every two years aside from the administrative cost and time needed to collect the data. McDonald’s, for example, adjusts its prices more frequently.
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