The following is issued on behalf of the Minimum Wage Commission:

     Premised on detailed analyses, in-depth assessment and thorough consideration, the Minimum Wage Commission (MWC) has by consensus recommended that the current Statutory Minimum Wage (SMW) rate of $32.5 per hour be raised to $34.5 per hour.

     The Chairperson of the MWC, Mr Jat Sew-tong, SC, said today (January 18), "We are delighted to learn that the Chief Executive in Council has accepted our recommendation about the SMW rate after considering the report of the MWC."

     Mr Jat added, "Our recommendation is based on the consensus and support of all the MWC Members. The recommended SMW rate maintains an appropriate balance between the objectives of forestalling excessively low wages and minimising the loss of low-paid jobs, while giving due regard to the need to sustain Hong Kong's economic growth and competitiveness. We earnestly hope that it could be accepted by the Legislative Council."

     Adopting an evidence-based approach, the MWC reviewed the SMW rate in a comprehensive, objective and balanced manner. Apart from making reference to statistics in the Array of Indicators (Note) (including a large number of indicators which were released more frequently and more up-to-date), the MWC also deliberated in detail the findings of other surveys and fully considered the views on the review of the SMW rate from various sectors of the community. The MWC also took into consideration relevant factors which were pertinent to the review and could not be fully quantified, and conducted stress tests to estimate the potential impact of each SMW test level under different economic conditions.

     According to the data from the Annual Earnings and Hours Survey conducted by the Census and Statistics Department (C&SD), there were 154 500 employees with an hourly wage less than $34.50 in May to June 2015, representing 5.2 per cent of all employees in Hong Kong. Making reference to the more recent wage data from the C&SD and assuming the Hong Kong economy would grow moderately by 2 per cent year-on-year in real terms for the first half of 2017 (i.e. the scenario of moderate economic growth), the MWC crudely estimated that the number of employees involved with an hourly wage less than $34.50 in the first half of 2017 before the implementation of the recommended SMW rate would be around 74 100, representing 2.5 per cent of all employees in Hong Kong. The MWC envisaged that the uprating of the SMW to the recommended level would raise the wages of the majority of employees involved. Taking into account the impact of the knock-on effect on pay hierarchies (knock-on effect), the number of employees with pay rises owing to the uprating of the SMW would eventually be greater than the number of employees involved.

     For the impact on enterprises, taking into account rest day pay and meal break pay (for employees who are granted these payments according to their employment contract or agreement) in addition to the statutory requirements as well as the impact of the knock-on effect in the scenario of moderate economic growth, the MWC estimated that the total wage bill would increase by about $660 million or approximately 0.1 per cent. The MWC envisaged that the impact of the recommended SMW rate should be manageable for most sectors, including small and medium enterprises.

     As regards the impact on the unemployment rate, the MWC estimated that the recommended SMW rate would lift the overall unemployment rate by about 0.1 percentage points in the scenario of moderate economic growth. With the prevailing unemployment rate in Hong Kong still relatively low, and barring any abrupt economic downturn, the recommended SMW rate would be unlikely to trigger a marked deterioration in labour market conditions.

     For the impact on inflation, assuming a full pass-on of additional wage bills to prices of products and services and taking into account the first round of wage-price spiral effect, the MWC estimated that the Composite Consumer Price Index inflation would go up by about 0.2 percentage points in the scenario of moderate economic growth. As a measure of inflation on the grass roots, the corresponding rise in the Consumer Price Index (A) inflation would be around 0.3 percentage points. As it would be unlikely for all enterprises to fully pass on the additional wage bill to consumers, the actual impact of the recommended SMW rate on inflation should be smaller than the above estimates.

     The full text of the "2016 Report of the Minimum Wage Commission" has been uploaded to the MWC's website (www.mwc.org.hk).

Note: The Array of Indicators covered four areas of consideration, namely general economic conditions, labour market conditions, competitiveness and social inclusion.

Ends/Wednesday, January 18, 2017
Issued at HKT 15:00

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