Following is a question by the Hon Tommy Cheung and a written reply by the Acting Secretary for Labour and Welfare, Mr Stephen Sui, in the Legislative Council today (February 8):
      
     Many members of the catering industry have relayed to me that the majority of eateries are operating with great difficulties. They have pointed out that the introduction of the Statutory Minimum Wage (SMW) in 2011 and its two subsequent upward adjustments, as well as high shop rents have resulted in the operating costs of the catering industry rising incessantly, and difficulties in recruitment have led to a continuous decline in the service standards of the industry. In face of manpower shortage, some restaurants have to shift to operate in less labour-intensive modes, such as takeaway or customer self-service. Those members have also pointed out that the authorities should step up their efforts in collecting data and conducting relevant studies on the catering industry so as to gain an accurate understanding of the business environment of the industry, thereby avoiding the formulation of policies and measures that would increase the burden on the industry. In this connection, will the Government inform this Council:

(1) whether it has assessed the ripple effect on the pay hierarchy of the catering industry in the past six years brought about by the introduction and upward adjustments of SMW; if it has, of (i) the percentage of the number of employees affected by the effect in the total number of employees in the catering industry, (ii) the rate of increase in the average wage of employees affected by the effect, and (iii) the rate of increase in the median wage of employees in the catering industry, in each of the years; if not, the reasons for that and whether it will conduct such an assessment each year in future;

(2) of the respective numbers of employed persons, vacancies and average numbers of ranks in respect of each type of eateries in each of the past six years;

(3) of the (i) total income, (ii) total expenditure, (iii) profit margin, (iv) total rent and the percentage of the total income it represented, and (v) total expenditure on employee salaries and the percentage of the total income it represented, in respect of each type of eateries in each of the past six years;

(4) of the respective numbers of eatery licences that were newly issued and cancelled/expired without renewal in respect of each type of eateries in each of the past six years;

(5) whether it has assessed the impacts of the introduction and upward adjustments of SMW, high shop rents and difficulties in recruitment on the service quality and operating mode of the catering industry; if it has assessed, of the details; if not, whether it will conduct such an assessment; and

(6) whether the authorities will introduce targeted policies and measures to alleviate the operating difficulties encountered by the catering industry; if they will, of the details; if not, the reasons for that?
      
Reply:
      
President,
      
     Regarding Member's questions, I provide the consolidated reply as follows:
      
(1) According to the results of the Annual Earnings and Hours Survey conducted by the Census & Statistics Department (C&SD), Table 1 below sets out the year-on-year rates of increase in median hourly wages of employees in the restaurant sector.
      
Table 1: Year-on-year rates of increase in median hourly wages of employees in the restaurant sector from 2011 to 2015
  

	Apr-Jun 2010	May*-Jun      2011      (* implementing the initial SMW# of $28 per hour)	May-Jun      2012	May*-Jun      2013      (* uprating of SMW to $30 per hour)	May-Jun      2014	May*-Jun      2015      (* uprating of SMW to $32.5 per hour)
Year-on-year rate of increase in median hourly wages (%)	2.9	14.3	5.6	5.8	7.2	6.0

Note: Since 2011, the reference period has changed from the second quarter to May to June.
#SMW (Statutory Minimum Wage)

     In 2011 and 2013, the Government commissioned consultancy studies to assess respectively the pay hierarchy knock-on effect (knock-on effect) of implementing and uprating Statutory Minimum Wage (SMW) in the retail and restaurant sectors. According to the consultancy studies, with respect to the matched target employees in the restaurant sector, the median of the year-on-year rate of change in hourly wage of the first decile group who benefited from SMW directly was about 40.8 per cent in September 2011 and about 7 per cent in September 2013. These consultancy studies did not record the annual percentage of the number of employees affected by the knock-on effect in the total number of employees in the catering sector.
      
     In conducting its latest review of the SMW rate, the Minimum Wage Commission (MWC) has further improved the estimation method of knock-on effect following a thorough review of the actual experience since the implementation of SMW. The review outcome indicated that in the past two SMW upratings, for all sectors as a whole, the additional wage bill induced by the impact of knock-on effect was 1.7-1.9 times (i.e. knock on multiplier) of the "additional wage bill required to comply with the statutory requirement", and such knock-on effect was more significant in the restaurant sector given its multi-layered grade structure.
             
(2) According to the results of the Quarterly Survey of Employment and Vacancies conducted by C&SD, the numbers of persons engaged and vacancies in different types of food and beverage services establishments from 2010 to 2015 are set out in Tables 2 and 3 below. The survey does not collect data on the average number of ranks for specific categories of food establishments.
      
Table 2: Number of persons engaged in different types of food and beverage services establishments from 2010 to 2015    
 

Type of food and beverage services establishments	Number of persons engaged(5)
	2010	2011	2012	2013	2014	2015
Chinese restaurants(1)	96 189	103 854	105 888	106 255	107 949	106 141
Non-Chinese restaurants	23 770	26 608	28 812	29 946	31 863	32 026
Fast food shops(2)	42 308	43 071	42 922	43 284	44 043	45 012
Other food and beverage services(3)	54 820	57 836	57 501	57 849	59 089	59 983
Total(4)	217 088	231 368	235 123	237 333	242 944	243 162

 
Table 3: Number of vacancies in different types of food and beverage services establishments from 2010 to 2015
   

Type of food and beverage services establishments	Number of vacancies(6)
	2010	2011	2012	2013	2014	2015
Chinese restaurants(1)	2 112	2 428	3 787	4 325	5 297	4 354
Non-Chinese restaurants	834	1 073	1 616	1 965	1 834	1 917
Fast food shops(2)	1 539	1 429	2 694	3 296	3 482	3 088
Other food and beverage services(3)	1 768	2 454	2 901	3 417	3 823	3 559
Total(4)	6 253	7 383	10 998	13 003	14 435	12 918

 
Notes:
Figures refer to averages of the four quarters of the year.
(1) Including Hong Kong style tea cafes.
(2) Including cooked food and beverage stalls at food courts.
(3) Including event catering, bars and lounges, coffee shops, etc.
(4) Figures may not add up to total due to rounding.
(5) Persons engaged include paid employees, working directors, working proprietors, active business partners and unpaid family workers. 
(6) Vacancies refer to unfilled job openings which are immediately available, and for which active recruitment steps are being taken on the survey reference date.  

(3) Based on the data collected from the Annual Survey on Economic Activities conducted by C&SD on a yearly basis, the relevant statistics on specific categories of food establishments and the whole food services sector from 2010 to 2015 are set out in Appendix.
      
(4) The numbers of restaurant licences newly issued by the Food and Environmental Hygiene Department and those cancelled/expired without renewal in the past six years, with a breakdown by types of restaurants, are respectively set out in Tables 4 and 5 below.
      
Table 4: Number of restaurant licences newly issued from 2011 to 2016      
 

Year Licence Type	2011	2012	2013	2014	2015	2016
General Restaurant Licence	828	849	956	1 051	1 080	1 098
Light Refreshment Restaurant Licence	350	361	366	407	422	390
Total	1 178	1 210	1 322	1 458	1 502	1 488

Table 5: Number of restaurant licences cancelled/expired without renewal from 2011 to 2016
    

Year Licence Type	2011	2012	2013	2014	2015	2016
General Restaurant Licence	593	682	697	654	634	582
Light Refreshment Restaurant Licence	283	355	318	273	289	247
Total	876	1 037	1 015	927	923	829

 
(5) When reviewing the SMW rate, in addition to making reference to a large number of statistical data, MWC also examined and analysed other relevant information, including the written and oral submissions collected from stakeholders and members of the public during intensive and extensive consultation, so as to take into account other relevant considerations that could not be fully quantified. The views reflected by the restaurant sector on the operating mode of businesses and service of the sector had been taken into account. The Government and MWC will continue to monitor the possible impact of SMW on the relevant sectors.
            
(6) The Government has all along been providing assistance to small and medium-sized enterprises (SMEs) of various industries with a view to enhancing their competitiveness. These include the catering industry which comprises a large number of SMEs. For example on financing, the SME Loan Guarantee Scheme administered by the Trade and Industry Department provides up to 50 per cent loan guarantee for approved loans taken out by SMEs and the maximum amount of loan guarantee for each SME is $6 million.
      
     To help SMEs including those in the catering industry to secure loans in the commercial lending market and lower their loan cost, the Government has extended the application period of the special concessionary measures under the SME Financing Guarantee Scheme to February 28, 2017, reduced the annual guarantee fee rate for loan guarantee applications approved under the measures by 10 per cent, and removed the requirement of a minimum guarantee fee rate of 0.5 per cent for loan guarantee applications.  The Government provides a total guarantee commitment of $100 billion for the measures.
      
     To assist the catering sector in meeting its manpower needs, the Labour Department set up the Recruitment Centre for the Catering Industry in 2009 to provide free and on-the-spot recruitment service for employers of the sector. Starting from July 1, 2016, the Government also implements a measure to waive the licence fees for restaurants and fees for restricted food permits for a year till June 30, 2017, benefiting some 20 800 restaurants and operators.

Ends/Wednesday, February 8, 2017
Issued at HKT 16:35

NNNN