Global Employer Services News May 2021

Hong Kong minimum wage frozen for first time ever

The Hong Kong government announced on 2 February 2021 that the statutory minimum wage will be frozen at HKD 37.5 per hour for the next two years to 2023. It is the first time that the government has frozen the minimum wage since it was introduced on 1 May 2011.

Secretary for Labour and Welfare Law Chi Kong said the government’s decision was based on the fact that most of the labour and employer representatives on the Minimum Wage Commission (MWC) have already agreed to maintain the current minimum wage, given the deep economic recession brought on by the COVID-19 pandemic and the high unemployment rate (as of February 2021, Hong Kong’s unemployment rate had soared to a 17-year high of 7.2% or 261,600 people). The government was also aiming to avoid cuts in low-paid jobs increasing the unemployment rate further (according to data from the MWC, around 22,000 employees were paid the hourly minimum wage as of June 2019, and more than half were security guards and cleaners).

Law stressed that the minimum wage should not be the only solution for low-income families and for reducing poverty, as the government is looking at other measures to help the underprivileged.

However, the government’s decision to freeze the statutory minimum wage at the 2019 level is a double-edged sword. It will have a negative impact on low-income families and poverty, as the purchasing power of the current minimum wage will be reduced due to the inflation factor.

Low-income workers have voiced concerns that their standard of living will fall as the prices of consumer products continue to rise in response to the incremental costs created by the COVID-19 pandemic. The pandemic has resulted in costly disruptions in the supply chain and flights and voyages being cancelled or delayed as a result of government interventions such as quarantine, stricter customs checks and entry restrictions.

According to the Census and Statistics Department’s latest Consumer Price Index (CPI) figures for January 2021, consumer prices rose by 1.9% overall in January 2021 compared with the same month a year earlier. The rate of inflation is likely to rise in the near future as a consequence of the persistent incremental rises in the prices of various types of consumer products.

Looking ahead, the local and global economic situation will continue to be challenging amid the ongoing threat of COVID-19. The government should continue to monitor the situation closely, and it may need to adjust the statutory minimum wage as soon as it is appropriate, rather than waiting until 2023.

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Joseph Hong