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Wednesday, Mar 22, 2023

New minimum wage still fails the working poor as wealth gap widens

New minimum wage still fails the working poor as wealth gap widens

At HK$40 per hour, the minimum wage is below the welfare payment needed for a family of two to survive, and demotivating when the city’s richest earn over 47 times more. The minimum wage must catch up with inflation and do better than welfare payments in allowing workers to support a dependent.
After a four-year freeze, the minimum wage will finally increase in May, to HK$40 (US$5) per hour, up by a mere HK$2.50. When this was first announced, we criticised it as unacceptable because it was lower than what a family of two would receive through the Comprehensive Social Security Assistance (CSSA) scheme.

In response to the criticism, Secretary for Labour and Welfare Chris Sun Yuk-han said the CSSA scheme served as a safety net and should not be compared with the minimum wage. Many people work not simply because of the money, he added, but also because it’s important for their mental and physical health. He said many people in Hong Kong have strength of character because they would rather work than be on welfare.

Sun’s remarks about people wanting to pull themselves up by their bootstraps seem an attempt to justify how low the minimum wage is, and also negatively label families who need to turn to the CSSA. But society shouldn’t be encouraged to believe that taking up a low-paying job or even being exploited is praiseworthy.

For many people, the primary goal of work is to earn enough money to support themselves and their family. According to the Minimum Wage Commission in Hong Kong, the purpose of establishing the minimum wage is to strike “an appropriate balance between the objectives of forestalling excessively low wages and minimising the loss of low-paid jobs”, while also sustaining “economic growth and competitiveness”.

But since the minimum wage was introduced in 2011, greater emphasis has been placed on the economic environment. The commission has failed to prevent wages from being too low.

Also, over time, fewer people are benefiting from the minimum wage. In 2011, when it was set at HK$28 per hour, 6.4 per cent of employees (about 180,000 people) benefited. But, according to the Census and Statistics Department, by 2021, only 2.6 per cent of employees (about 73,300 people) earned less than HK$40 per hour, and only 0.5 per cent of all employees (about 14,000 people) earned the minimum wage of HK$37.50.

Further, in 2011, the difference between the minimum and median wage was 46.6 per cent. Since then, the gap has widened and the figures – as of 2022 – stand at 50.5 per cent, or HK$38.20. This growing disparity reflects how far the minimum wage has fallen behind.

Government statistics show that, on average, one working member of a family needs to support one other unemployed person (such as a child or senior citizen). So, in our research, we used the average monthly CSSA payment for a two-person family (HK$10,962) as a benchmark to see if the minimum wage can meet basic needs.

On average, a full-time unskilled worker earning the minimum wage works 49.7 hours a week. If he or she worked 26 days a month and earned HK$40 per hour, they would only make HK$9,651 a month. That is HK$1,300 less than they would have received through CSSA. The new minimum wage is simply not enough to cover basic needs – and it also demotivates workers.

For wage earners, life was already difficult before Covid-19. The pandemic exacerbated this and left many unemployed and underemployed. In our report last October, we found that the wealth gap in Hong Kong has been growing, and the richest now earn over 47 times more than the poorest.

In the first quarter of last year, the average income of the poorest had fallen by 22.9 per cent since the pandemic in 2019. While we are happy to see an increase in the minimum wage, it is still nowhere near enough and does little to improve the lives of low-income workers.

Oxfam Hong Kong believes three factors need to be considered when reviewing or setting the minimum wage: it needs to catch up with inflation; be higher than the average two-person CSSA payment; and enable workers to support one other person who does not have a job.

Based on these criteria, the minimum wage should be set no lower than HK$45.40, and should be reviewed annually to ensure it is adjusted in a timely manner to prevent workers from losing purchasing power.

An almost negligible increase in the minimum wage is unjust and a great disservice to workers who toil in the city day in, day out. The government should do more to improve the lives of low-income workers and close the rich-poor gap.

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