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Topic:

Is the newly implemented minimum wage law a blessing or a curse? Discuss.

The implementation of minimum wage law in Hong Kong remains a hotly debated controversy even though the statutory minimum wage has been into force on 1st May 2011. Opinion is still divided on whether setting a wage floor will help or harm workers as well as the overall economy. In my opinion, the newly implemented minimum wage law is a curse rather than a blessing to society. According to the ordinance, wages payable to an employee in respect of any wage period, when averaged over the total number of hours worked during that time, should be no less than the statutory minimum wage rate of HK$28. It is without doubt an important and fundamental reform not only affecting employers and employees, but also people from all walks of life including property owners and consumers. To begin with, the government claims that implementing the minimum wage law is a decisive way to eliminate poverty by offering reasonable compensation to lowskilled workers, thus raising the living standard of grassroots. However, the government may overlook the problem of unemployment as a result of implementing minimum wage. With an increase in wage payment, employers will possibly raise their requirements when employing unskilled labourers. As a consequence, numerous uneducated employees are likely to be sacked in order to cut operating costs. How can they make a living after losing their jobs? Besides, some other supporters also put forward the idea that implementing minimum wage law would stimulate a corresponding increase in consumption, thereby boosting investment and businesses. In stark contrast to their optimistic expectations, many franchise business operators are reported to have fallen into a predicament in their businesses. For instance, it is estimated that about 10% of the 7Eleven outlets are likely to go out of business. To make it even worse, countless small businesses have to close down for they cannot afford to pay such rates. In a farsighted view, the implementation of minimum wage law produces pernicious consequences in Hong Kongs economic development. On the other hand, every ordinary citizen will suffer from inflation accelerated by imposition of a minimum wage. The undesirable effect is that consumer goods become more expensive after the wage increase, aggravating the financial burden of the underprivileged. For example, many restaurants and security companies have no

choice but to increase their charges to offset the burden of higher labour costs. Paradoxically, this is most unfavourable to low-income people, including the minimum wage earners. Moreover, it is unrealistic to say that all employers would conform to the ordinance without any resistance. To put it bluntly, it is believed that the majority of employers are looking for ways to get around the law. Tension mounts between employers and employees because the former have to negotiate and come to agreement with the latter as to whether meal breaks and rest days would be paid or not. To make it even worse, some unscrupulous employers may lower labour costs by forcing workers to become falsely self-employed or discriminating against disabled staff. In this sense, how can the minimum wage law be implemented effectively? Furthermore, a pay rise that is not in accordance with the market mechanism but merely imposed by government diktat can overshoot the mark. From a macroeconomic perspective, unnecessary intervention in the operation of the market will definitely be retaliated by market. It is really satirical and sad that this should ever happen in such a place as Hong Kong which is known as the freest economy in the world. In the end, the government may have to introduce complex regulations supervising the operation of the minimum wage system. Consequently, Hong Kong would probably lose its position as an international financial hub. All in all, it is too early to draw any assertive conclusions before the minimum wage system has been operating for a certain period of time. From my point of view, the drawbacks of implementing the minimum wage law outweigh its benefits. Most important of all, the panacea to a better working condition lies in whether we can establish amicable employer-labour relations.