HongKong Views

The minimum wage should signal a change in social values

Updated: 2010-06-18 07:45
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The subject of a statutory minimum wage has been discussed in Hong Kong for over a decade, if not for decades. Only recently was there a real breakthrough. Within weeks, the statutory minimum wage will become law. The Chief Executive had promised to take action to introduce it if the "wage protection movement" failed. The wage protection movement was a voluntary scheme to keep wages among cleaners and security guards no lower than the median wage in the industry. The scheme was launched in October 2006. In October 2008 the SAR government concluded that the results, though positive, were unsatisfactory. The current debate is no longer about whether or not to introduce the minimum wage, but rather at what level.

For years the statutory minimum wage has been regarded with apprehension by both the business sector and some economists because it will raise business costs and will constitute a form of market intervention. It is generally believed that the minimum wage does exact a price on economic efficiency. But there is also something to gain. As I pointed out in an earlier article in this column the challenge is to ensure that the gains more than offset the losses. Pitching the statutory minimum wage at the right level is central to achieving net social gains.

To accept the statutory minimum wage is also to accept a change in social values. Profits and economic efficiency become no longer paramount. With the introduction of a statutory minimum wage, it is hoped that a new form of capitalism - let us call it a "caring capitalism" - is born. In order for the minimum wage to be a blessing for Hong Kong, employers will need to accept this change in values, and start showing greater concern for the welfare of the very workers who contribute materially to the bottom line of their businesses. Workers too need to show a consideration for the difficulties faced by employers, some of whom are struggling to survive. Even apparently strong profits over a year need not provide the necessary margin for comfort, since competition may be keen, and some accumulated surplus may be needed to tide over deficits during the lean years.

On the mainland, a series of suicides at Foxconn drew public attention to the dreary lives of workers toiling long hours for meagre wages. The company announced drastic wage increases for its workers. Within days of the announcement, Honda workers went on strike, which led to a 30 percent wage increase. Companies in the Pearl River Delta and across China came under intense pressure to raise wages of their workers. Yet the fear is that the pendulum might swing too far to the other extreme. Then came the news that Foxconn was going to move most of its operations to the north, apparently to cut labor costs. This is bad news for Foxconn workers. To many observers, the promised wage increases turned out to be a smokescreen. The issue begs the question whether employers can be genuinely concerned with the welfare of their workers. It is too bad if employers and employees must be antagonists, when in fact they are partners. Indeed, only when the interests of workers, the management of the company, and those of the shareholders are all taken care of fairly can the company survive and thrive. That will require a consideration for the requirements of each and frank and open dialogues.

Hong Kong is well known as the world's freest economy. Unfortunately, market forces cannot be counted on to bring about fairness. Market forces have rewarded landlords holding title to scarce premium land with huge rental increases and capital gains, although it is often the toiling people and the entrepreneurs taking risks who ultimately make the land productive. On the other hand, workers in abundant supply cannot expect a decent wage if they all are equally productive. There is clearly a need for a redistributive policy - and an understanding that redistribution does not imply taking away from people who are productive to subsidize those who are not.

Let us hope that Hong Kong's capitalists, workers, and landlords will each abandon the extreme positions of always making decisions based exclusively on self-interest and start thinking about others and the collective interest as well. It is too bad if workers have to go on strike to get what they deserve. It is even worse if workers use industrial action to get rewards that ultimately strangle their companies to death or discourage or even inhibit further investment. To turn a lose-lose situation into a win-win situation requires understanding and great wisdom.

The author is director of the Centre for Public Policy Studies, Lingnan University.

(HK Edition 06/18/2010 page2)