Negative Effects of the Minimum Wage in Hong Kong

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1st May 2011 is a memorable day to Hong Kong’s workers as this day is the implementation of minimum wage. For many low skilled workers, it was a happy news as their salaries were increased. However, if we consider the implementation of this law in long term, it is not hard to figure out the negative impacts of the lodge of minimum wage law. In this eassy , we would like to take about the negative effects on employment, small-scale companies and the living standard of Hong Kong citizens.

Apart from the problem on unemployment, the implementation of minimum wage poses a threat to the survival of small-scaled companies. That is, it decreases the competitiveness and profit of those companies. Admittedly, the lodge of the law diminishes the rivalry of small-scaled business organizations to those sizable counterparts. Simon Wong Ka-wo, chairman of the Hong Kong Food Council stated that when an indifferent restaurant and a well-known restaurant chain hired workers with similar salary, most people would like to work at a larger restaurant as better welfare would be provided (Zhao,2012). Therefore, it is rather difficult for small restaurants to recruit people. More closely examined, in order to exist in this business environment, they need to add the amount of wages to maintain the quality of services. However, this may further bring them into a dilemma of increasing expenses. Moreover, the declining revenue of the small-scaled companies will surely affect their survival or will increase the chance of bankruptcy. As it is commonplace that business corporations want to generate the largest profit, they will try their best to cut down the operating cost. Nevertheless, the buffer of the small business organization is usually not enough as they have relatively lower amount of liquid capital. Therefore, most of them will have a sharp decrease in profit. To illustrate, Li Hing Cleaning Services grumbled they got a 70 percent of shrinkage in...
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