The $28 minimum wage: one year on

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It’s been a year of swings and roundabouts for Hong Kong’s lowest paid industries. Shirley Zhao looks at how the city’s security guards, cleaners and restaurant staff have coped

It will have been a year since the implementation of the minimum wage law on May 1. Over that time, much of what economists had predicted, such as higher unemployment rates, did not happen. In fact, the unemployment rate remains just over three percent one year on, which equates as one of the lowest levels in the past 13 years. Yet other predictions such as higher inflation did occur – and that’s believed to be more or less related to the minimum wage. This is why many people are now asking if $28 is too low for workers to cope. Many workers’ unions, in fact, are suggesting an increase to between $33 and $35. And the debate will rage on for some time yet…

Concerns about unemployment and inflation are normal in Hong Kong, yet the real impact of the minimum wage has clearly affected the city’s lowest paid industries.

According to a recent study by the Census and Statistics Department, under the minimum wage law, in May and June last year, the median monthly salary of the lowest paid industries saw an 18 percent raise. Among these industries, the median monthly salary of property management, security and cleaning was $8,700, amounting to a 25 percent increase. The median monthly salary of the food and drinks industry was $9,000, a 12.5 percent increase.

Meanwhile, inflation has been steadily rising. The inflation rate last year was 5.3 percent, compared to 1.7 percent in 2010. The inflation rate in May last year was 5.2 percent, a 13 percent hike from last April. Taking this increase into account, the salary rise to $28 per hour suddenly becomes much less impressive, especially when the highest inflation rate was recorded in the last quarter of 2011, reaching 6.4 percent.

From these statistics, industries like property management, security and cleaning look apparently better off. “It is highly competitive in the security industry these days,” says Yu Mei-wan, a 56-year-old who has been a security guard for more than 10 years. “Even young people are looking to be a security guard. Many high-end shopping malls only hire Form 5 graduates as their security guards.” Yu, who works for Fu Heng Shopping Centre in Tai Po, earns $7,500 a month. She works 8.5 hours a day and has four to five paid holidays a month, which makes her hourly wage around $29. Before the minimum wage law, she earned less than $6,000 a month, or around $23 per hour.

Yet Yu feels life was easier when she was earning less. “Although my salary is higher, the prices have also been rising even more,” she says. “The $28 minimum wage standard was calculated according to the prices in 2009. It’s completely out of date.” Yu supports a ‘reconsideration’ on the minimum wage standard and thinks $33 to $35 per hour is sufficient enough for her family to survive. Her 60-year-old husband will retire in July this year, and she will be the only one supporting her three-member family.

“I’m worried about the future,” she says. Unemployment is certainly not included in her vision of the future, despite concerns that the unemployment rate might rise if there is a hike in the minimum wage threshold. “Everybody knows you can find a job in this industry, thanks to the developers – although they are the ones who also make everything expensive,” says Yu. “Old security guards can work for single buildings, while younger guards can work for malls and larger estates. They [the developers] just keep hiring people because now every building needs security guards.”

Lee Lok Ting, executive secretary of the Hong Kong Buildings Management and Security Workers General Union, says employers have their own methods of coping with the increasing payment. “For old, single buildings, the employers tend to cut the working hours of the security guards,” he tells Time Out. “While for buildings aimed at the middle classes, they tend to raise the property management fee.”

In the food and drinks industry the minimum wage law has made employers of small and medium restaurants less competitive against the larger restaurant chains, according to Simon Wong Ka-wo, chairman of the Hong Kong Food Council. “People tend to choose large restaurant corporations for better welfare since the salary is more or less the same,” says Wong. “At the same time, more manpower is going to the security and retail industries, so smaller restaurants find it very hard to hire people.”

If smaller restaurants do not have enough staff, the quality of food and service will eventually suffer. To hire more staff, they need to raise the salary higher than the minimum wage standard which, mixed with rising rent, could force them to raise the prices of their products to cover the cost. For restaurants, higher prices could further weaken their competitiveness. “They [the smaller restaurants] are thrown into a dilemma,” says Wong.

Although Wong admits that rising rent, the appreciation of the yuan and a ‘murky’ economic environment are the major causes of rising prices, he still believes the minimum wage law ‘indirectly caused higher inflation’ and imposed pressure on small and medium companies.

“I’m definitely against an increase in the minimum wage [right now],” says Wong. “I think a revision of the minimum wage standard every two years is more reasonable.”

Wong Pit-man, general secretary of the Eating Establishment Employees General Union, tells Time Out how the smaller restaurants deal with the dilemma. “Many of them cut staff and make the rest do more work in shorter working hours,” he says. “It’s also common practice for a restaurant to close a few months after it opens, and then re-open again in another place. It makes them easier to operate because the previous accounting records can be cancelled and they can start new records again.”

The cleaning industry, dominated by outsourcing companies, is a different story. Mickey Yan Wai-kiu, managing director of Li Hing Cleaning Services, complains that since the implementation of the minimum wage law, his company has suffered a sharp 70 percent decrease in profit. “You need to offer relatively low prices to your clients to get contracts, and you need to offer relatively high wages to employees to keep them,” says Yan. “You can’t fire a lot of staff because you need enough people to do so much work. The workers have more choices too. Many of them choose to be security guards. It’s really difficult.”

Yan says increasing the minimum wage to $33 an hour would mean that his 1,500-strong company pays an additional $10 to each employee per hour – which amounts to more than HK$3 million every month – and that his firm has to subsidise the bulk of the extra cost because many of its private sector contracts were signed before the minimum wage raise.

The workers, however, often find their workload is much heavier.

Chau Kam-sheung, a new immigrant earning $7,280 a month for cleaning, needs to support her four-member family with her husband, who is a security guard. “Life gets more and more difficult these days,” says Chau. “We need to spend a lot for our children’s education and the prices are so high everywhere. We’re not saving any money; we are just surviving.” Chau has a 19-year-old son and a 17-year-old daughter. She wants to see an increase in the minimum wage but feels it will help very little, given that prices will keep on rising.

Chau works eight hours a day but says she has a heavier workload now because her company has cut cleaners for each contract so that it can pay more for the rest – but the workload remains the same.

“I don’t know where the cleaners [who were cut from the contracts] went,” she says. “When you can gain about the same everywhere, who wants to do cleaning?”

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