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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. 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..
    2. 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.
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