Minimum wage series 2
The Minimum Wage Commission, a statutory body tasked with reviewing Hong Kong’s minimum wage, has reached an agreement to propose a HK$2.50 increase in the minimum wage rate. If the proposal is approved by the government, the minimum wage in Hong Kong would be raised to HK$40 (US$5.10) per hour.
But can the raise help the low-wage workers in Hong Kong? These three figures say it all.
1. Inflation rate
The minimum wage is proposed to be raised from HK$37.50 to $40, with an increase of 6.7%. The increase looks good by percentage. However, we should not forget that the minimum wage was frozen in the past four years, during which the accumulated inflation hit 8.1% .
2. Purchasing power parity
Since the proposed increase could hardly keep up with inflation, the actual purchasing power would still decline by 1.4%. In other words, low-paid workers and their families would be worse off.
3. Number of beneficiaries
A raise to HK$40 is a slap on the wrist for most employers in Hong Kong, as they could hardly hire people at HK$40. So how many people will actually benefit from the raise? Based on the average wage growth trajectory, it is predicted that only 20,000 people will benefit from the minimum wage increase.
 Inflation in the Consumer Price Index (A) that reflects grassroots household expenditure.
 Loss of purchasing power = (1 + increase in minimum wage) / (1 + accumulated inflation over the same period) – 1.
 The projection of 2023 wage changes is based on the nominal wage growth in the past 11 years.