Analyse stakeholders concerns and implications

Over the past two decennaries, with the increasing concern on the lifting poorness and the inequality in Hong Kong, the issue of transporting out the lower limit pay jurisprudence by Hong Kong authorities has been widely discussed. Minimum pay is the lowest hourly wage that the employers need to lawfully pay to employees. On 1 May 2011, the statutory minimal pay becomes effectual and the initial rate is $ 28. From now on, it is a heatedly debated subject between the employers and the employees. Most of the employers and the authorities functionaries hold a big portion of opposing positions because they are stressing the lower limit pay will interference the rule of free market that would indirectly increasing the unemployment rates due to the intentionally fondness of the lowest pay. It may likely doing employees more harmful than earlier. Besides, a little figure of employees and trade brotherhoods expressed their uncertainties that the minimal pay may go the maximal pay. But many trade brotherhoods and labour organisations support the lower limit pay to be set up that it can protect the basic life to workers, particularly in Hong Kong of the high unemployment rates and under the low rewards environment. The constitution of the minimal pay is truly of import that protecting the lower income parties and relieving the poorness in Hong Kong. We are traveling to discourse the companies should follow the lower limit pay jurisprudence or non even though it may take down down their net income or even face fiscal troubles.


Employers and Employees

Most of the employers must see their net income and cost foremost when the lower limit pay jurisprudence become effectual on 1 May 2011.

For the little to medium company: ( e.g. Baguio Group in Lingnan Universityc?§c‘¤??…??”???a‹™??‰e™?a…¬a?? )

If they hire the workers is $ 20 per hr and working 8 hours per twenty-four hours before the execution of the lower limit pay jurisprudence, the monthly ( ) wage is $ 20x9x30 = $ 4800. Besides, employers would wish to add some benefits to actuate their employers such as fillip around $ 500 per month. So that the employers may pay around $ 5300 per month ( include other benefits/allowances ) . The statutory minimal pay is $ 28 per hr. That ‘s mean the employee receive a $ 28x9x30= $ 7560 plus the benefits ( $ 500 ) , the entire monthly wage is $ 8060. The difference is $ 2760 ( $ 8060- $ 5300 ) , which increase around 52 % . It must be a big sum to employers. Due to the cost additions ( and presume the net income remain unchanged ) , most of the employers will utilize the layoff method to employee in order to keep their concern. Therefore, the unemployment rate may be addition. It may increase the spread of poorness than earlier. The minimal pay jurisprudence may non practical in Hong Kong.

After the layoff, the work load may be increased by the decrease of the old employee. Employees will experience more emphasis, tried than earlier.

Harmonizing to the compulsory provident fund ( MPF ) set by Hong Kong authorities, if the wage more the $ 5000, the employees and the employers need to take a 5 % for salvaging. In this cause, the employees and employers may do lose-lose state of affairs. When the original wage of the employees is $ 4950, after following the jurisprudence, the new wage is $ 5200. Then they take a 5 % of the entire wage for salvaging ( $ 260 ) , the concluding wage is $ 4940. It will be less than earlier ( $ 4950 ) . The employers both need to take a 5 % , $ 260 to employees for salvaging. Before the execution, the employers do non necessitate any MPF. But, after the execution, the employers will be a batch. Obviously, the companies may confront the fiscal troubles.

For the big company ( E.g. HSBC )

For case, in bank, the original wage of the employees may be above $ 12000 per month, which is higher than the minimal pay, $ 28. The determination of the employers is non seemingly affected by this jurisprudence even they do non care about. These companies may non the fiscal troubles.


If the little companies follow the lower limit pay jurisprudence, their outgo will be a batch. Employers may take to cutoff the employees in order to command the cost. However, they do non see cut downing the measure from provider. Therefore, supplier acquire a somewhat consequence in this jurisprudence.


When the work load will be increased to the employees, it may likely cut down the service clip to each client, particularly in the service industry such as fast nutrient concatenation.


Minimal pay intervention the free market

From now on, there is a point where the supply of a good or service at a certain monetary value will be the demand for that good or service at that monetary value. At this point the market for this good is said to be in equilibrium and the market for this good will unclutter. The application of this theory to the labour market can be seen in below. This figure illustrates the economic position of how labour markets work. It assumes that the pay rate will tendency towards the equilibrium point at the intersection of L0-W0, where the sum of labour that workers wish to offer is exactly equal to the sum of labour that houses wish to engage. By presenting a minimal pay at Wm, this will do the supply of labour to increase as more workers wish to work at the new rate and the demand for that labour will fall, from L0 to Lm, as houses cut down the figure of new employees they take on. Therefore, harmonizing to this theoretical account, the net consequence of presenting a minimal pay is to make unemployment.

It can non be doubted that such a theoretical account presents a really persuasive instance, mostly due to the simpleness of the statement. On the footing of this theoretical account the authorities has argued that a minimal pay will instance big graduated table umemployment.

Inflation and lower limit rewards

Keeping rising prices how has ever been one of the present authorities ‘s chief policy ends. They have argued that the debut of a minimal pay would take to higher degrees of rising prices as higher paid workers attempted to reconstruct derived functions and as houses passed on higher pay costs to consumers through higher monetary values. In this manner the overall fight of the economic system would be damaged, one time once more taking to the accusal that a minimal pay would be occupations.

Against lower limit rewards

Minimum pay addition the labour costs

Some analysts reported that if all of the workers who under $ 6000 per month increase their monthly wage to $ 6000 in the entire labour cost in Hong Kong, it merely merely increase the 2 % of the entire labour cost. Regardless of the computation of the standard, they besides ignore the mistake of the statistical discrepancy that the statistical figure ( mean figure, entire figure ) can non accurately reflect the facts. There are no evident effects and force per unit area on the labour costs to the big endeavor in Hong Kong when the lower limit pay jurisprudence is implemented. The job is that Hong Kong chiefly focuses on the service industries by the little and average companies such as fast nutrient eating house and retail. Their labour cost is non merely an of import portion of the entire outgos but besides many employees of the wage are under $ 4000 per month. The constitution of the minimal pay is besides hit these little concerns. When these little concerns closed down, the another fast nutrient ironss such as McDonald ‘s will increases the $ 15 to $ 25 per hr and raises a half times of the monetary value of beefburger so as to keep their fight. On the overall economic impact by the lower limit pay jurisprudence, it is non merely increase the unemployment rate but besides decrease the market fight among the little and average endeavors. It is bit by bit towards the big economic systems of graduated table of the big endeavors to occupy/dominate the market state of affairs. Minimum rewards will take to monolithic occupation losingss as companies will no longer be able to use the same figure of workers at a new higher rate

Minimal pay can non protect the low income parties ( under $ 6000 )

First of wholly, the security of the income and employment are every bit of import. Under the lower limit pay system, it could protect the employee ‘s income in uninterrupted employment but may non be able to protect the chance of employment. The employer may cut down the figure of workers in order to equilibrate the outgos when the lower limit pay is followed. Hence, the remainder of the employees may increase their work load to recovery the old phase. But those employees, who earn less than $ 4,000 per month or $ 20 per hr, would confront the unemployment or travel into the black labour market. Assorted surveies found that those employees are difficult to come in the labour market such as immature workers with no experience, older people and people with disablements.