The Minimum Wage Policy in Hong Kong : An Agenda for Empirical Research

An across-the-board Statutory Minimum Wage (SMW) is expected to come into effect in late 2010 or later in Hong Kong. We draw on theoretical arguments for and against a SMW policy, examining empirical evidence outside Hong Kong, to suggest an agenda for empirical research. The anti-poverty argument for a SMW implies that the SMW rate should significantly exceed the Comprehensive Social Security Assistance (CSSA) monthly payment rate of HK$ 4095. However, the anti-poverty argument is problematic because of the complexity of the poverty problem. The unemployment argument against a SMW has fewer consensuses today than it did three decades ago because of conflicting empirical results. The theory of monopsonistic labor market is the leading theoretical explanation of this situation. It is an empirical question if the labor market that hires low-wage workers in Hong Kong is monopsonistic or competitive. The source of monopsony power and the effects of an across-the-board SMW can differ among industries depending on the difference between the industry average wage rates and the SMW. Firms that hire low-wage workers can also adjust differently depending on their competitiveness in their product markets. Empirical investigation can help improve policy making with informed decision making