LC Paper No. CB(2) 495/98-99(04)

LETTERHEAD OF The Hong Kong General Chamber of Commerce


23 October 1998

via fax 2877 8024

Ms Lolita Ng
Senior Assistant Secretary (2)5
Council Business Division 2
Legislative Council Secretariat
Legislative Council Building
8 Jackson Road, Central
Hong Kong

Dear Ms Ng

Re: Proposal on Minimum Wages in Hong Kong

Thank you for inviting views from the Hong Kong General Chamber of Commerce in respect of the captioned-subject.

This important subject was discussed amongst members of our Human Resources Committee, and we concluded to opposite the introduction of a minimum wage system in Hong Kong. The reasons are:

  1. Reduction of our Regional Competitiveness

  2. As far as we know, not many of our neighboring countries are adopting a minimum wage system. Korea, Singapore and Malaysia have not ratified any minimum wage fixing conventions. Although Singapore has established the Singapore National Wages Council, it is mainly responsible for formulating broad guidelines on wage adjustments in line with Singapore's long-term economic and social development. The exact salary to be offered is subject to negotiation and mutual agreement between employers and the employees. In short, Singapore does not impose any minimum wages. In times of recent economic downturn, strategies to increase our competitiveness is subject to priority. We believe the legislative interference of market wages will no doubt undermine Hong Kong's regional competitiveness.

  3. Drastic Increase of Production Cost

  4. A minimum wage system will tend to increase its base line year-on-year without necessarily related to the economic reality, hence the system will invite salary escalation, especially in labour-intensive businesses such as retailing, food and beverage, construction and manufacturing. High production costs will impose strong impact on local businesses, especially the small and medium enterprises.

    There may be a danger of discouraging overseas investment in Hong Kong as well. As a result, employers will incline to hire less employees. Even if they have a geninue need to hire staff, they tend to hire people on contract basis (short or long term). This will not help the government's desire to reduce unemployment in the long run.

  5. Adverse Effect on First Time Job Seekers

  6. A minimum wage system will preclude employers hiring inexperience workers at lower salaries. It will then make it more difficult for fresh graduates or first time workers to gain entry into employment. The minimum wage system will in fact be an obstacle for first time job seekers.

  7. Increased Bureaucracy

  8. If a minimum wage system were to be introduced, enormous administrative resources has to be allocated by government to administer, monitor and audit the system. This will involve high costs and produce more administrative bureaucracy. Yet another layer of bureaucracy is the least we need in Hong Kong.

  9. Interference into the Free Market

  10. We always believe in the free market and the Government's non-interference into our economic activities is the key to Hong Kong's success. Employee remuneration should be determined by the market. Pay should be based on qualifications and capabilities; supply and demand.

  11. Criteria to Determine the Minimum Wages Structure

  12. Minimum wage is a very complex issue and inevitably will become a political football. Wage should be determined at the workplace, not by politicians.

Yours sincerely
For and on behalf of

Poon Yun
Chairman, Human Resources Committee