CAES 1906 - I
Hong Kong is one of the world’s most prosperous and financially wealthy cities. However, despite the wealthy background, the government has serious economic concerns over the high levels of poverty and income inequality in Hong Kong (“The Situation of Poverty”, 2003). A study by the Hong Kong Council (2009) has reported that more than 17% of Hong Kong residents or 1.2 million people live in poverty. Furthermore, Hong Kong has the highest income inequality proportion among the world’s most advanced economies. As a solution to this problem, this essay will focus on arguing whether the government of Hong Kong should implement a minimum wage policy or not. In essence, it may have a negative effect from a business perspective. The policy could damage the competitiveness of workers due to the increasing cost of labor. However, the introduction of a minimum wage policy will be beneficial from a social point of view as it helps to increase the standard of living, thus decreasing income inequality and lowering poverty levels.
If the Hong Kong government implements the minimum wage policy, it can damage Hong Kong’s competitiveness and thus, undesirable economical losses will emerge. The minimum wage policy results in a loss of competitiveness of Hong Kong companies because global investors would move on to another country with lower wage costs as higher costs will reduce their profit margins. Hong Kong is famous for its “free market” system (Chow, 2002), so control over wages will damage its reputation as well as the overall investment and business environment. The increase in the cost of labor will ultimately transfer on to the consumers, creating unnecessary costs and as well as inflation due to the increased costs of living. The Liberal party and the Democratic Party (2009) have made a strong argument that the minimum wage policy will increase the...