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The Minimum Wage Policy in Hong Kong

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  • Tan Boon Seng
  • Stephen Ko

Abstract

An across-the-board statutory minimum wage (SMW) will come into effect in Hong Kong on 1 May 2011. We draw on theoretical arguments for and against a SMW policy, examining empirical evidence outside Hong Kong to suggest an agenda for research. The anti-poverty argument for a SMW implies that the SMW rate should significantly exceed the comprehensive social security assistance (CSSA) monthly payment rate of HK$4095. However, the anti-poverty argument is problematic because of the complexity of the poverty problem. The unemployment argument against a SMW has a lower level of consensus today than it did three decades ago because of conflicting empirical results. The theory of a monopsonistic labour market is the leading theoretical explanation for this situation. It is an empirical question if the labour market that hires low-wage workers in Hong Kong is monopsonistic or competitive. The source of monopsony power and the effects of an across-the-board SMW can differ among industries depending on the difference between the industry average wage rates and the SMW. Firms that hire low-wage workers can also adjust differently, depending on their competitiveness in their product markets. Empirical investigations can help improve policy making with informed decision making.

Suggested Citation

  • Tan Boon Seng & Stephen Ko, 2010. "The Minimum Wage Policy in Hong Kong," Asia Pacific Journal of Public Administration, Taylor & Francis Journals, vol. 32(2), pages 163-176, December.
  • Handle: RePEc:taf:rapaxx:v:32:y:2010:i:2:p:163-176
    DOI: 10.1080/23276665.2010.10779372
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    References listed on IDEAS

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    1. Sara lemos, 2004. "The Effects of the Minimum Wage on Wages, Employment and Prices," Discussion Papers in Economics 04/10, Division of Economics, School of Business, University of Leicester.
    2. David Card & Alan B. Krueger, 1997. "A Reanalysis of the Effect of the New Jersey Minimum Wage Increase on the Fast-Food Industry with Representative Payroll Data," Working Papers 772, Princeton University, Department of Economics, Industrial Relations Section..
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