Sunday, July 18, 2010

Hong Kong Passed Its Minimum Wage Law Yesterday....

Despite having a legislature which is composed mainly by members not elected but selected by Beijing and dominated by business elites, they have passed their first minimum wage law. The minimum wage is set at S$5.84 per hour.

In a posting about a year ago[Link], I explained why the PAP govt refuses to implement minimum wage laws. The 3rd world wage structure in Singapore has resulted in enormous disparities:

Lowest paid jobs in Singapore*

1. Office cleaner $600
2. Manufacturing labourer and related worker $760
3. Kitchen assistant $991
4. Plastic product machine operator $994
5. Hospital attendant $1,000
6. Travel agency and related clerk $1,016
7. Waiter $1,080
8. Pre-primary education teachers $1,100
9. Lorry attendant $1,102
10. Pest exterminator $1,106
* Based on median starting salary from The New Paper

If a meaningful minimum wage is set, the economy which is dependent on low wages (Cheaper, Better, Faster) will be affected. Countries that have a 1st world wage structure have no problems implementing minimum wages and in fact, they all have it to raise the living standards of a small segment of the population at the margin. For me, the issue is not whether we have minimum wages or not but years of unbalanced policy making, lack of independent unions and dependence on cheap foreign labor has made it difficult to implement minimum wages. We have a large segment of our population now locked in an underclass with little chance of elevating themselves no matter how hard they work.

Hong Kong is not a democracy, it is not even a nation. I think for a long time, many believe that in Hong Kong, it is every man for himself and 'you die your business' ....complete laissez faire....brutal capitalism...where people have 'you sell you soul for money' kind of greed. But today they have comprehensive welfare, minimum wages, and a populace yearning for democracy and justice and are willing to take to the streets for it. The minimum wage legislation saw huge opposition from big businesses who threatened to layoff workers but the fact is only their profits will be hurt. The minimum wage set at S$5.84 per hour is not high but the victory shows that it is possible in Hong Kong to win against the big businesses there to bring about greater social equity - something we cannot see in Singapore. They will be able to do more when they become more democratic in a few years.

If Hong Kong can pass a minimum wage law, where does that leave Singapore? Think hard about what kind of political system we have here. How the PAP has become intertwined with a network of businesses to which it is linked and how the establishment has other interests and priorities other than that of ordinary Singaporeans. There is no interest to bring about balance in policy making - the PM can tell us 6 months ago that they are serious about moderating the foreign influx only to take it back last week by saying 100,000 more are needed. Be it floods, crowded trains, insufficient public housing, income gap, ...when the problem affects ordinary Singaporeans and not PAP's interests, there is little will in govt to get it fixed.
Hong Kong Passes Minimum Wage Law

Sat, Jul 17, 2010

HONG KONG - Hong Kong on Saturday passed its first minimum wage law, a controversial issue that has divided the city's business sector and labour groups for more than a decade.

Lawmakers hailed the passage of the bill - secured after more than 40 hours of heated debate - as a historic moment for Hong Kong, where policymaking is often heavily influenced by the powerful business elite.

Officials said the law will take effect next year, and a government-appointed task group is expected to propose a minimum wage level in the coming months.

But pro-democracy legislators, whose numerous attempts to have the bill amended were blocked by their pro-government counterparts, said there were many loopholes in the new law.

Lee Cheuk-yan, lawmaker and a leader of Hong Kong Federation of Trade Unions, said: "No doubt it is a historic moment for Hong Kong."

"We have now said goodbye to an unfair practice in a capitalist economy and acknowledged the fact that workers should be rewarded for their hard work," he told AFP.

Recent surveys showed that many workers at large retail chains are only paid between two and three US dollars an hour.

Lee said it was "regretful" that the legal framework for setting the minimum wage will be largely controlled by the government.

Under the law, all members of the task group will be picked by the city's chief executive. The legislature can only approve or reject the wage level proposed by the group, but cannot make any amendment.

The law will require the task group to review the wage level once every two years, instead of once a year as proposed by trade unions.

"We will have to use public pressure to campaign for a fair minimum wage level, since under the legal framework the control will be largely in the hands of the government," Lee said.

Unions have pushed for the minimum wage to be fixed at 33 Hong Kong dollars (S$5.84) an hour, saying anything less would not cover basic expenses with living costs having risen sharply in recent months.

Many countries already have minimum wage legislation in place, with the hourly rates in New York and London set between 7.25 and 8.80 US dollars.

Hong Kong's minimum-wage proposal had faced stiff opposition from some of its largest employers, with some threatening large-scale layoffs if the change was introduced.

Michael Chan, chairman of fast-food giant Cafe de Coral - who was ranked by Forbes magazine as the 35th richest man in Hong Kong in 2009 - has said his company might issue a profit warning if the hourly rate proposed by the unions became law.


Anonymous said...

PAP has 98% seats in Parliament. They thus have the ultimate liberty to pass or not pass any type of Laws, be it minimum wage, freedom of assembly, death penalty laws, election laws and what not laws.

Hong Kong, despite not being a nation and also more laissez faire, has better democracy and human rights.
People also protest freely, with up to 500,000 taking to the streets at one time.

Even our own DBS paid a good public compensation to their Hong Kong clients who lost their money in the structured notes debacle. However DBS was silent on what was paid to SIngapore clients, as compared to those paid in Hong Kong. Why?

So can anyone enlighten why Hong Kong is better in these respects than Singapore, besides Minimum wage Laws?

Are we peasants partly to blame for this state of affairs?

I say peasants becasue they bore the brunt of the PAP policies, not the elite.

Or are peasants the minority here, so much so that they are outvoted by the elites at every election?

FedUp said...

of course peasants are to be blamed.

you reap what you sow. you vote for blood-suckers, you get sucked.

vote OUT pap

World Holidays blog said...

from what i have observeed, the rich in Singapore are getting richer but the poor and middle class are stagnating in income.

Anonymous said...

Had SIN Leaders came close to the performances of the Hong Kong Legislaters(Cabinet). Me thinks many of the Local Bloggers would not be doing what they are doing in Cyberspace now.

Probably, many would be vying to be in Parliament to contribute to Society. Or, they may want to spent their times pursuing leisures.

Even the blinds know the rich are getting richer and the poor are poorer in SIN, they may not see but they never failed to hear the sighings.

Minimun wage could be meaningless if the costs of livings are raised faster and frequently than a token sum to the present wage. A vicious cycle had been created, restrict foreigners will cause great fall in consumptions. Allow foreigners, Singaporeans get sidelined for jobs and prices of everything goes up. And the ultimate Archilles Heel, the peasai size of the City.

The Talented Leaders are confident they have all the answers, BUT unfortunately, the People do not have confidence and trust of their Leaderships and there are all the signs that they have given up hopes on them.


Anonymous said...

Passing of minimum wage laws is only a wayang. There is no point in interfering with prices if the underlying supply and demand is imbalanced. Setting a minimum wage while massively importing foreigners will only increase unemployment for locals at the margin.

The proper way forward is to address the supply directly (i.e. stop massive importing of foreign labor, and allow wages and overall cost of living to rise).

Clearly our govt is not interested in doing that.

Anonymous said...

Michael Chan is just a greedy bastard. He has no qualms paying himself a fat salary every year, but is queasy about paying his workers a decent wage.

Our PAP leaders show initiative and courage in paying themselves millions, but think that putting in place a mininum wage for low-income earners as extravagent or costly for businesses.

Unethical business owners have no qualms changing cars every year, buying second homes or just throwing their money away at KTV lounges, but will pinch every penny when it comes to paying their workers a decent salary.

You bastards go burn in hell!

Anonymous said...

Profits are NOT hurt by minimum wage laws.

The problem lies with management being grossly overpaid. The top leaders of industries in most countries are paid salaries and bonuses at least 30-40 times the annual income of average workers.

Many workers have problems paying the rent and bills for one home, but the top elites have 3 homes and 4 cars easily.

Corporate profits will not be hurt by minimum wages, as long as the increased wage bill is borne by the elites.

For too long, they have enjoyed a fat salary at the expense of low-income workers, who generally do not have a fair share in corporate profits.

Anonymous said...

The PAP would rather give free money to businesses in the form of job credits than directly to underpaid workers and the unemployed. Has anyone noticed the number of new luxury cars on the roads after the job credit scheme was implemented?

Given the overwhelming evidence, if you still think government's priority is Singaporeans, you must be deluded, living in your own world.

no country for poor man said...

The difference between HK and Singapore is the political. We have to look past the labels. Having a a GE every 5 years doesn't make one a democratic country. Obviously, the HK government respect's its citizens' rights more. Singapore just views requests from its citizens as nuisance to be ignored and discouraged. They view most citizens too stupid for their own good or smart asses that need to be smacked down and put in their places.

Anonymous said...

Billionaires in HK have no money to support the minimum wage, but have money to fly private jets to Singapore to pick up durians.

Anyone who often reads financial statements of companies knows that the bulk of company costs goes to salaries - salaries of its top executives, and not to rank-and-file employees.

I suppose after introducing minimum wage laws, Michael Chan will no longer be the 35th richest guy in HK. He probably will drop to 45th richest instead. My heart aches for him. Big loss!

Anonymous said...

Maybe we ask the wooden Senile Minister (whose wife happen to think S$600K p.a. salary is just peanuts) whether having a minimum wage bill is good constructive criticism ?

I just wonder how many coffins does our MM need to buy with that S$2M+ yearly salary that he gets when he finally kicked the bucket ?

Anonymous said...

I never understood how economists can shamefully argue that a minimum wage would lead to inflation and massive loss of profits and jobs fleeing our land to Vietnam or Indonesia?

Today, I read that a director of an insurance agency can splurge on holidays and luxuries. On other days, I read of well-heeled executives who can buy new condos. I read of billionaires who can send private jets to buy durians.

If rich people can be paid so excessively, then it is clear that they are earning excessively at the expense of the lower-income people.

I have friends who head insurance agencies, and they too confess that they earn that much not because their sales are good, but because they are creaming off commissions from the sales of their top agents, who are in turn, paid excessive commissions for selling financial products.

Your financial products pay you less than 3% return because most of your money goes to paying the top executives, who earn close to a million a year.
If not for paying the top people excessive pay, you would be getting better returns, and poorer people will be getting more decent salaries.

$PAP$ said...

once a upon a time HK and Spore were under British rule. Noticed how far HK has progressed since
1997 inspite the fact Communist China is their lord and master.

Now take a look at S'pore under LKY and his PAP after 50 Years.
One BullShit political system with a father and son at the helm plus countless stooges/dummies with no independent minds.

These PAP scums are shameless, using tax payers money to ensure they have Minimum Wages themselves in $million$ !

Anonymous said...

Dear all,

I agree with some of what you have shared. Please allow me to share with you a personal experience. This boss told the employees that business was not so good as last year.

Therefore no bonuses for that year. However unknown to the employees, this same boss in that same year bought a bentley and a Rolls Royce. Total cost is at least $1.8 million. The RR was at least $1 mil and bentley was at least $800k.

I honestly think that that person should have given the bonus but the company belongs to that person.

In newspaper or tv, you will read about how minimum wage can increase costs for businesses.

But what do I see with my own eyes? Have the newspaper and tv ever asked why the whole boss family MUST drive luxury cars??? Even when the child was in poly, the present was a Ferrari!

Before any rich people cry foul about high costs due to minimum wage, can they at least cut the cost from their own sky high salaries???

A gini coefficient of higher than 0.5 can lead to riots on the street. Do we really want to see this? We must vote correctly to correct the current imbalance. If not our children will pay a high price for our cowardice.

Economist with a heart

Anonymous said...

Dear Economist

We must vote correctly to correct the current imbalance. If not our children will pay a high price for our cowardice.

Who is "we"?
Lucky is rich!
It does not matter who runs the country.

Anonymous said...

They want to admit 100,000 more foreigners? China and India's economic growth are slowing down, European stock market has tanked, pulling down any hope of US economy recovering with it. SIN is lucky it made 15% growth this year (of course the rich and the govt are the one to benefit most from it). Next year won't be so easy and smooth... we'll be lucky if we grow by 7%, and what happens to those 100,000 foreigners? Not all will leave right away if they lose their jobs - they will compete with locals for their jobs. Siow liao.

xizor2000 said...

BTW, they have passed a law to have a minimum wage, but the figure hasn't been decided yet. I quote:

Officials said the law will take effect next year, and a government-appointed task group is expected to propose a minimum wage level in the coming months.

Anyway, if anyone would consider that HK Legco has done way better than Singapore, then it is time they read up on all the news surrounding the recent protests - from the building of the high speed rail to election reforms. On top of that, the underlying resentment over the runaway property prices.

no country for poor man said...

The reality of the situation is, most rich or highly paid people are mobile. If employers in Singapore are not willing to pay them what they think they deserve, they can move to another country. Singapore government wants to keep these people so have to give in to their interests.

Poor or poorly paid people have limited mobility. They are stuck in Singapore even if doing the same jobs in other First World countries pay 3 - 4 times what they are getting in Singapore.

Given the circumstances and especially the lack of threat to their continuing rule, I don't think anything will change. The poor have no voice, the middle class are either cowed or apathetic and the rich call the shots. Even in low tax country like Singapore, the more tax you pay, the more you are heard.

Anonymous said...

The minimum wage has not been set. In fact it will be decided by a group of people selected by the non-elected government. Somewhere between HKD23-HKD33.

Anyway, I think in the UK they have a minimum wage bill but people are still being paid under that amount.

Minimum wage bill or not, there will be ways to beat the system~

Anonymous said...

"no country for poor man" at 19/7/10 08:42 wrote: "Poor or poorly paid people have limited mobility. "

Not true across the board. Staff nurses are poorly paid, with starting pay of $1.6K, but they are very mobile. That's why Singapore keep churning out nurses but still not enough. Because we don't pay them enough to stay in Singapore.

no country for poor man said...

In that case, good for them. Go where they are appreciated more. Staying put and hoping the system will change means condeming oneself and one's children to a bleak future. For those who are mobile and find life in Singapore unbearable should consider other countries that give better opportunities. If one is not mobile, one should at least ensure that one's children get the right skills to be mobile.

Rakyat said...

to anon 13.27

Minimum wage bill or not, there will be ways to beat the system~

well, jail or no jail, people will still commit crimes?!!

having a minimum order means that the govt is serious in looking after the welfare of people. and so our million dollar $$$$ ministers are supposed to be the best, they can surely close of loop holes.

Anonymous said...

Based on the HK minimum wage, every worker doing the jobs listed will earn $1326. Which is more than what they are earning now. Come election time, we should provide this information to every low wage earner and ask him to think twice as his vote pays the Ministers more but not himself

Juni~A said...

NS-tax for non-NS-serving PRs and FTs to support the financially struggling portion of our population who have sacrificed the best part of their youth and career in NS and putting themselves at a significant disadvantage for employment with their reservice/IPPT/RT requirements, would certainly help -- Imposed upon the middle to higher income FTs and PRs (but not the low income FWs, i.e. poor foreign workers, such as the construction workers, and bus drivers, etc). Although what truly needed is for us to have a government that not just focuses on the interests of big-businesses and their never-ending strive for bigger profits, but also the interest of the people who voted them in and contributed to their extortionate salaries to do their job. A more strictly regulated and targeted immigration, fair minimum wage, and economic policy with some sensible degree of flexibility and incentives is needed here, to ensure that home-grown small businesses here could staff their workforce w/o going broke, while not at the expense (in terms of wage, and jobs) of the very basic livelihood of the lower-income citizens.