Hong Kong is one of the world’s most prosperous and financially wealthy cities. However, despite the wealthy background, the government has serious economic concerns over the high levels of poverty and income inequality in Hong Kong (“The Situation of Poverty”, 2003). A study by the Hong Kong Council (2009) has reported that more than 17% of Hong Kong residents or 1. 2 million people live in poverty. Furthermore, Hong Kong has the highest income inequality proportion among the world’s most advanced economies.
As a solution to this problem, this essay will focus on arguing whether the government of Hong Kong should implement a minimum wage policy or not. In essence, it may have a negative effect from a business perspective. The policy could damage the competitiveness of workers due to the increasing cost of labor. However, the introduction of a minimum wage policy will be beneficial from a social point of view as it helps to increase the standard of living, thus decreasing income inequality and lowering poverty levels.
If the Hong Kong government implements the minimum wage policy, it can damage Hong Kong’s competitiveness and thus, undesirable economical losses will emerge. The minimum wage policy results in a loss of competitiveness of Hong Kong companies because global investors would move on to another country with lower wage costs as higher costs will reduce their profit margins. Hong Kong is famous for its “free market” system (Chow, 2002), so control over wages will damage its reputation as well as the overall investment and business environment.
The increase in the cost of labor will ultimately transfer on to the consumers, creating unnecessary costs and as well as inflation due to the increased costs of living. The Liberal party and the Democratic Party (2009) have made a strong argument that the minimum wage policy will increase the cost of wages which leads to the increase of unemployment as the companies start to employ fewer workers due to their limited human resources budgets. This in turn will become a burden for the Hong Kong government as it has to deal with and manage the rising unemployment rate with various macroeconomic policies.
The introduction of minimum wage can however be a solution to alleviate poverty in Hong Kong. Despite Hong Kong’s high rate of inequality, its unemployment rate at 3. 5% is one of the lowest among developed countries (“The World Fact”, 2009). Thus the low unemployment rate is evidence that the primary cause of poverty in Hong Kong is not unemployment but low wages. Therefore, the minimum wage policy should be able to provide sufficient purchasing power to those in poverty, enabling basic living standards.
Since the proportion of the low income population is large, the implementation of minimum wage will bring more balance to income inequality in Hong Kong. For example, the level of poverty in England has decreased by 4. 0% since 1999 when the minimum wage policy is introduced and this, in turn, lowers the income inequality among England employees (“The World Fact”, 2009). As a result, the overall standards of living in England have increased by 20% from 1999 to 2009(Robert, 2010). Implementation of a minimum wage policy will give those in poverty a greater incentive to work.
Without a minimum wage, low skilled workers may receive less than $2000 per month, which is not enough to carry on their living thus CSSA (Comprehensive Social Security Assistance), should be provided to them( ). It would be logical to think there would be almost no incentive to work if working has the same result as being unemployed. The implementation of a minimum wage policy helps to set a distinct difference between the CSSA and working. With the implementation of minimum wages above the CSSA standard rate, those in poverty will be more compelled to work for a higher income level.
As those in poverty have more incentive to work and more disposable income to spend, their living standards will improve and this will result in lowering the poverty level. The implementation of a minimum wage can be harmful to the competitiveness of Hong Kong businesses on a global scale. However, the social benefit of implementing this policy outweighs the economic and social costs as it helps to reduce poverty while at the same time improve living standards. With the minimum wage policy, both of the government and the low skilled workers can have benefits as less people will receive the CSSA from the government, they can save their budgets.
Also the workers will be more motivated to work hard and compelled to work for a higher income level which leads to welfare society. The example of the implementation of a minimum wage policy in England further supports the policy as living standards have increased significantly. Therefore, the implementation of minimum wage policy is justified. World count : 799 References 1. Great London Authority (2009). A fairer London: The 2009 living wage in London.
Retrieved on September, 21, 2010 from http://www. london. gov. uk/mayor/economic_unit/docs/living-wage-2009. pdf 2. Chow. C (2002). The free market and Hong Kong. Conditions for a free market system. Retrieved on September, 20, 2010, from http://www. hkpri. org. hk/bulletin/6/chow-cg. html 3. Legislative Council Secretariat (2003). The situation of poverty in Hong Kong. Important note. Retrieved on September, 21, 2010, from http://www. legco. gov. hk/yr04-05/english/sec/library/0405in22e. pdf 4. Robert. J & Alastair. M (2010). Institute for fiscal studies.
Poverty and inequality in UK : 2010. Retrieved on September, 22, 2010 from http://www. ifs. org. uk/comms/comm116. pdf 5. Center Intelligence Agency (2009). The world fact book: Hong Kong. Unemployment rate. Retrieved on September, 22, 2010 from https://www. cia. gov/library/publications/the-world-factbook/geos/hk. html 6. Center Intelligence Agency (2009). The world fact book: England. Population below poverty line. Retrieved on September, 22, 2010 from https://www. cia. gov/library/publications/the-world-factbook/geos/uk. html.