Zhigang LI University of Hong Kong

1
Zhigang LIUniversity of Hong Kong
Why hasnt Hong Kong ever passed a legislation of
minimum wage?
2
The absence of a regulation on minimum wage

• Hong Kong unlike many developed economies had no
  minimum wage although an ordinance signed in 1932
  (the Minimum Wage Ordinance) made it
  theoretically possible. This ordinance gave the
  Chief Executive the right to set up a Trade Board
  composed of employer and employee representatives
  in order to implement minimum wages in some
  economic sectors. But this possibility has never
  been used.

3
The presence of a regulation on minimum wage

• Domestic helpers have already benefited from a
  regulation on minimum wage. Domestic helpers were
  coming from developing countries around Hong
  Kong, mainly from Philippines, Indonesia or
  Thailand. Their salary could not be lower than
  HK3,320 per month. Even though this level was
  very low, these jobs continued to attract people
  as the salary was higher than what people
  received in their country of origin and they
  could send funds to their countries of origin.
  This level had even been cut in 2003 (HK3,670),
  officially due to the economic crisis that hit
  Hong Kong at that time.
• The aim of the minimum wage for domestic workers
  was to allow them to live in decent conditions.
  If there was no minimum wage, there was a high
  risk of having foreign people going to HK and
  merely surviving. But the law was not observed
  everywhere. According to a survey, 40 of
  Indonesian maids employed in Hong Kong earned
  less than the official minimum while they worked
  during very long hours.

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Who benefit and who lose?
Usually at this regulated wage, there will be
excess supply (i.e., quantity demanded y supplied). Suppliers will compete for buyers,
offering additional attractions.
A
Wage
Labor Supply
Minimum Wage (floor)
Firms response Hire less workers. Keep those
workers who are more able. Fire workers who are
less able.
Use more machines.
C
Labor Demand
D
Quantity
Excess supply
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Impact on other markets that hire minimum-wage
workers
A
Price
Supply with minimum wage legislation
Supply
People who consume this kind of good lose. Who
are they?
C
Demand
D
Quantity
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End