Managerial Economics

Topics: Minimum wage, Wage, Employment Pages: 13 (3767 words) Published: January 4, 2014
EXECUTIVE SUMMARY

The Minimum Wage Ordinance Cap. 608 is an ordinance enacted by the Legislative Council of Hong Kong to introduce a minimum wage in Hong Kong in July 2010. The executive branch proposed a minimum wage of HK$30 (~US$3.871) per hour in November 2010, which the Legislative Council voted to accept after much debate in January 2011. It came into effect on 1 May 2011. Prior to this, there had also been a fixed minimum wage for one specific class of workers, foreign domestic helpers, of HK$3,740/month.

In this report, we will look extensively at how the introductions of standard working hours to better protect the health of workers and improve their family and social life. On the other hand, employers are concerned that the introduction of standard working hours would undermine the flexibility of the labour market and the competitiveness of Hong Kong.

We will look at how the introduction of the Statutory Minimum Wage (SMW) in May 2011, and the upcoming Statutory Working Hour (SWH) will have affect on Fast Food chain industry, in our particular case; Fairwood (Chinese: 大快活).

TABLE OF CONTENTS

Executive Summary1

Table of Contents2

1.Introduction3

2.Literature Review and Industrial Background4
2.1Literature Review
2.2Literature Background5

3.Methodology6
3.1Research Questions
3.2Research Design

4.Discussions and Analysis7
4.1Market Structure of Fast Food restaurant chain industry 4.2The Impacts of SMW and SWH on Cost Structure8
4.3Effects of SMW and SWH legislations on prices and business11
hours of Fast Food restaurant chain industry

5.Conclusion and Recommendations13

6.References15

1. Introduction

Since the debut introduction of the Statutory Minimum Wage (SMW) in May 2011, according to the Census and Statistics Department Reports, the median monthly wage for Fast Food Industry is resulting in and upward trend. From $11,500 in 2011 to $12,500 in 2012 (increasing 8% since May-June 2011).

Fortunately, the general economy in Hong Kong has been consistently favourable over the past two years. Per capita, the Gross Domestic Product (GDP) reflecting the local community’s standard of living is showing a change from $0.23 million in 2009 to $0.25 million in 2010 and continues to $0.27 in 2011.

The rise in GDP demonstrates the community’s willingness to spend on goods and products. However, the Consumer Price Index (CPI) portraying inflation rate is also on the rise. From 2009 to 2011, the CPI has rocketed from 0.57% to 5.3%. From these results it can be said that the economy is currently undergoing a very unhealthy uprising change.

The general belief is that the introduction of SMW results in the increase of labour costs for many workplaces, making it a challenge to overcome for the Hong Kong people. The public’s protests for the government to legislate Standard Working Hours (SWH) have also become increasingly audible. It can be foreseen that both legislations will become effective together in the near future. This will cause a big impact in employers’ operations.

It is hoped that an insight into the possible effects brought about by SMW and SWH on three identified objectives: Cost Structure; Product Price; Operating Hours. With these points in mind, we shall try to clearly analyze and give the public an opinion and recommendation for the current and future situations to come.

2 Literature Review and Industrial Background

2.1Literature Review

A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labor. Although minimum wage laws are in effect in many jurisdictions, differences of opinion exist about the benefits and drawbacks of a minimum wage.

The minimum wage is generally...
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