LCQ5: Reviewing Statutory Minimum Wage regime
9.11.2022

Following is a question by the Hon Kwok Wai-keung and a reply by the Secretary for Labour and Welfare, Mr Chris Sun, in the Legislative Council today (November 9): Question: Since the implementation of the Statutory Minimum Wage (SMW), the authorities have not conducted a comprehensive review on the SMW regime. There are views pointing out that the SMW level continues to lag behind and is grossly out of tune with the actual economic situation, resulting in an ever-increasing livelihood pressure on the grassroots. On the other hand, the Government put forth in the 2022 Policy Address the invitation of the Minimum Wage Commission to conduct a study on how to enhance the review mechanism for the SMW level. In this connection, will the Government inform this Council whether the relevant authorities: (1) will explore the proposal of "a review a year" (i.e. conducting a review on the SMW level annually) in the aforesaid study, and of the expected time for completing the study and implementing the enhanced review mechanism; (2) will conduct a comprehensive review on the mechanism for determining the SMW level in the aforesaid study, so that SMW can achieve the effects of narrowing the disparity between the rich and the poor and improving the problem of working poverty; if so, of the specific details and timetable of the review; if not, the reasons for that; and (3) will, by drawing reference from the practice of certain countries and regions to conduct empirical studies, conduct tracking studies on groups such as people with disabilities, elderly persons, women and young people in respect of the implementation of the SMW regime, so as to evaluate the impacts of the regime on such groups; if so, of the details; if not, the reasons for that? Reply: President, The Minimum Wage Ordinance (MWO) establishes the Statutory Minimum Wage (SMW) regime to provide a wage floor which forestalls excessively low wages, without unduly jeopardising Hong Kong's labour market flexibility, economic growth and competitiveness, and minimising the loss of low-paid jobs. Pursuant to the MWO, the Minimum Wage Commission (MWC), when required by the Chief Executive (CE) to do so, makes its recommendation on the SMW rate to CE in Council at least once in every two years. The MWC adopts an evidence-based approach in reviewing the SMW rate. Apart from making reference to and analysing statistical data and information, the MWC also conducts extensive and in-depth consultation with the community, including organisations representing employers and employees, on the review of the SMW rate and considers other factors that are pertinent to the review of the SMW rate but cannot be fully quantified. The four main areas analysed and considered by the MWC when reviewing the SMW rate include: (1) Array of Indicators (AoIs); (2) views from members of the public and stakeholders; (3) other relevant considerations; and (4) impact assessment. Since the implementation of the SMW in May 2011 and after four upratings, the employment earnings of grassroots employees have improved continuously. In June - August 2022, the average monthly nominal employment earnings of full-time employees of the lowest decile group, after excluding government employees and live-in domestic workers to whom the SMW does not apply, had risen cumulatively by 78.8 per cent compared with the pre-SMW period, translating into an increase of 29.6 per cent in real terms after discounting inflation. As regards the questions raised by the Member, my reply is as follows: (1) and (2) As announced in the CE's Policy Address delivered last month, the Government will invite the MWC to study how to enhance the review mechanism of the SMW rate, including the review cycle, how to improve efficiency, and balancing a host of factors such as the minimum wage level and sustained economic development, and make proposals to the Government. The Government will invite the MWC to formulate a work plan and timetable, explore different options, and promulgate relevant information in due course. As stipulated in the MWO, one of the major functions of the SMW is to provide a wage floor which forestalls excessively low wages. At the same time, the SMW rate also needs to ensure that Hong Kong's labour market flexibility, economic growth and competitiveness will not be unduly jeopardised, and minimise the loss of low-paid jobs. Apart from the SMW, the Government has implemented other targeted measures, including the Comprehensive Social Security Assistance Scheme and the Working Family Allowance Scheme, etc., to improve the subsidies for grassroots families and low-paid employees or the incomes of them. (3) The MWC is tasked to make a recommendation on the SMW rate. As mentioned above, the MWC, in discharging its function, analyses comprehensively relevant data and information of the socio-economic and employment conditions, and monitors continuously the socio-economic and employment conditions after the implementation and upratings of the SMW, including the impact of the SMW on enterprises and inflation as well as employees and the local labour market. The MWC also analyses the socio-economic characteristics, e.g. gender, age group, educational attainment and occupational group, of employees earning the SMW rate and their sectoral distribution. Under the MWO, employees with disabilities are entitled to the same protection of the SMW as able-bodied employees. The MWO also provides a special arrangement for employees with disabilities to opt to undergo productivity assessment to determine whether they should be remunerated at no less than the SMW or at a rate commensurate with their productivity. This strikes a balance between providing wage protection to employees with disabilities and safeguarding their employment opportunities. According to organisations in the disability and rehabilitation sector, most of the newly employed persons with disabilities are earning wages at or above the SMW rate. When conducting a new round of review on the SMW rate, the MWC will consider if adjustment to the data covered by AoIs is needed. The MWC will continue to fine-tune the review mechanism of the SMW rate in light of the operational experience.