Can a minimum wage at HK$40 help the low-wage workers in Hong Kong? 

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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% [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.

[1] Inflation in the Consumer Price Index (A) that reflects grassroots household expenditure.

[2] Loss of purchasing power = (1 + increase in minimum wage) / (1 + accumulated inflation over the same period) – 1.

[3] The projection of 2023 wage changes is based on the nominal wage growth in the past 11 years.

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