Letter to Hong Kong (English only)

Dear Leigh,

It has been two years since you last visited Hong Kong. Before you left, we had an interesting discussion on the Government ' s initiative to work in collaboration with the business community and labour sector to launch the Wage Protection Movement for cleaning workers and security guards. You cautioned that as the world ' s freest economy, Hong Kong should think twice before going down the route of a statutory minimum wage.

You might recall the news story about the blatant exploitation of a middle-aged worker who was employed by a service contractor to clean a public toilet in Kowloon a few years ago. He worked 13 hours to earn $78 a day, and this translated into $6 an hour. The plight of this worker sparked grave public concern. To rectify the situation, the Government promptly put in place measures to ensure that cleaning workers and security guards employed under Government service contracts are paid the market average wage.

As " Asia's World City" and an international business hub, our affluence is comparable to other developed economies. There are many caring employers with a strong sense of corporate social responsibility. They pay their employees reasonable wages and adopt family-friendly employment practices. However, for various reasons, there remains a sizable group of low-paid workers in Hong Kong. This, together with the widening wealth gap, has prompted the call for a statutory minimum wage.

Having taken the lead to prevent exploitation of cleaning workers and security guards employed under Government service contracts, we launched the Wage Protection Movement in October 2006 to promote, through voluntary and non-legislative means, wage protection in the private sector for these workers. We widely publicised this voluntary campaign through various channels with the support of major business associations and employer groups.

There has indeed been a culture change in the community after two years with a new understanding of wage protection for low-skilled workers and further recognition of corporate social responsibility. However, an overall review just completed shows that the Movement has failed to yield satisfactory results, with only 52 per cent of cleaning workers and security guards benefiting from it. Obviously, there are limitations in promoting wage protection through voluntary participation.

To honour his pledge to legislate for a minimum wage if the voluntary approach proves ineffective, the Chief Executive announced in his Policy Address about a fortnight ago that a statutory minimum wage would be introduced and, given the concern of the community about the well-being of all low-paid workers, an across-the-board approach would be adopted.

We are mindful that as an externally-oriented economy operating a linked exchange rate system, Hong Kong relies heavily on its internal price and cost flexibility to adjust to economic shocks and restore competitiveness. We will therefore take forward the introduction of a statutory minimum wage in a prudent and pragmatic manner. Our aim is to devise a system most suited for Hong Kong, taking full account of local circumstances while drawing on the successful experience elsewhere.

In introducing a statutory minimum wage, we need to strike a sensible balance among various key factors. On the one hand, we have to safeguard the interests of grass-root workers, protect them against exploitation and avoid excessively low wages. On the other hand, we have to prevent job loss, maintain our economic growth and sustain our business competitiveness. To enable us to find the optimal statutory minimum wage level that can attain this balance, we will need rigorous analyses based on sufficient data collected through well-designed surveys.

Our primary tasks at present are threefold. First, we need to prepare and draft the main legislation so that the bill is ready for introduction into the Legislative Council in the 2008-09 legislative session. Second, we need to enhance the current surveys on wage data and introduce new surveys tailor-designed to support the implementation of a statutory minimum wage. Third, we need to start establishing the Minimum Wage Commission, with members drawn from the labour sector, business community, academia and relevant government departments. The Commission will be tasked to advise the Government on the appropriate level of the minimum wage and its review mechanism. It will adopt an evidence-based approach in data research and analysis, taking into account a basket of economic indicators. As the necessary data has yet to be collected, it is premature to discuss the precise level of the minimum wage.

The Government's decision to go for a statutory minimum wage represents a significant milestone and breakthrough in protecting the well-being of Hong Kong's grassroot workers. It also demonstrates the qualities of a caring, compassionate and considerate administration.

I much look forward to the enhancement of wage protection for our low-paid workers through a statutory minimum wage. Let me reiterate that we will be extremely careful in designing the minimum wage system to minimise any possible negative impact on the local economy and employment. I believe that a well-designed system will be conducive to promoting social harmony and amicable labour relations.

I do hope to catch up with you before long and update you on this important issue.

Yours ever,
Matthew

Ends/Sunday, October 26, 2008