Minimum wage poised to rise

The minimum wage is increasing by HK$1.80 to HK$41.80 an hour, sources said, as the government mulls over a decision to go with a new formula for calculating the hourly wage and annual reviews.

The 4.5 percent hike, over the HK$40 that came into force from May 1 last year, is set to be the new mark after Chief Executive John Lee Ka-chiu said in a recent Labor Day cocktail reception that the Minimum Wage Commission had submitted a report following a study to improve the mechanism for wage reviews.

Sources said the government was considering suggestions for the wage reviews and the future direction of the mechanism in a prudent manner and that its decision would be announced next month.

The government is understood to be also planning to increase the frequency of carrying out the reviews to once a year instead of every two years.

The new formula for calculating the minimum wage will take economic growth and the consumer price index changes into consideration.

The calculation starts with deducting the average percentage change in the gross domestic product over the past 10 years from last year's figure, and multiplying it by 0.2, according to the sources.

The figure will then be capped at one, before adding it to the percentage change in last year's consumer price index. If the formula results in a negative figure, the minimum wage level will not be decreased. It will instead be frozen at the existing rate.

"Using the GDP to calculate the minimum wage is in response to the labor sector's suggestions for the fruits of the economic development to be shared, while the inclusion of the CPI in the formula is to reflect the level of inflation," sources said.

"The mechanism is to give a reference to the Minimum Wage Commission to have a more focused and efficient discussion. The final adjustment will have to be approved by the Executive Council."

Labor-sector lawmaker Kwok Wai-keung said moves to adopt annual wage reviews and use the GDP to calculate minimum wage adjustments would meet the sector's demands.

"The government actually owes us one adjustment, as the old calculation method came up with a result that the minimum wage level should be increased back in 2021, but the decision at that time was to freeze it," Kwok said.

He also supported the introduction of the formula. "Every meeting goes into a fierce argument over some [tiny] figures, but with the annual review arrangement, I think it will be better than before."

Democratic Alliance for the Betterment and Progress of Hong Kong lawmaker Frankie Ngan Man-yu also welcomed the new formula.

"[It] can provide an objective figure to settle arguments between employers and employees every year, while it can also speed up the process of adjusting the minimum wage level in accordance with the labor market," Ngan said.

"However, the formula should use the 10th percentile of the hourly wage of employees in the lowest-paid sectors, which is more correlated with grassroots workers, to calculate the minimum wage to focus on protecting low-income employees."

Hong Kong Federation of Restaurants and Related Trades president Simon Wong Ka-wo said the HK$1.80 increase was acceptable.

"If the economy is booming, the increase will be bigger, but we cannot guarantee the economy will improve every year. If there is a negative growth in the economy, the new formula will add to the burden of employers," Wong said.

But he said the catering sector is experiencing a manpower crunch, with many positions paying well above minimum wage and so the HK$1.80 an hour rise will not have too much impact on the sector.

However, the increase, which would be the lowest since the minimum wage was implemented in 2011, has received a lukewarm response as previous minimum increases never went below HK$2, except for when it was frozen for four years at HK$37.50.

It was not until last year that the minimum wage was raised by HK$2.50 to HK$40 per hour.

One worker, Auyeung, said the 4.5 percent hike was only "slightly better than nothing."

"It is such a small increase," he said. "I think it should be increased to over HK$50. I really want to ask the government: what can you buy with a dollar?"

Another worker, Choi, said the increase will be canceled out quickly as cost of living will go up following the raise.

A woman, Cheng, said: "It actually makes no difference, with or without the increase. It is just one dollar after all."

michael.shum@singtaonewscorp.com