TNAG-1064-FCO40-1314-Labour-relations-in-Hong-Kong-Professor-H-A-F-Turner-s-stud-1981 — Page 17

(g) Real wage decline and inflation

pointing to the need for a minimum voo

It is not clear why the decline in real wages between March and September 1979 (mainly immigration induced) and rising inflation are taken as evidence of the social need for a minimum wage. If anything, a minimum.

wage could encourage further influxes. (no-only it effective) (1) Regular adjustment of minimum wage is a

factor in combating potential labour unrest

Although Hong Kong will continue to be affected by world-wide inflation, there is no indication that domestically generated inflacion will be a permanent feature in the Hong Kong cconomy. For as long as we maintain a flexible cost/price structure, we will always be able to adjust and cope with external

forces. The adjustments may be sharp at times but will at least enable external competitiveness to he maintained and the labour force to be fully employed. A minimum wage would introduce rigidity to the labour market and hence to the cost/price structure. The consequence would be that more people would be unemployed and for a longer period. Concern about' potential labour unrest is naturally important,

particularly when the growth rate of the labour

force has recently been so rapid, causing a slow down in the rate of increase in wages in real terms. In the

event of a severe world recession, the extent of a downward adjustment in real wages could prove unacceptably large, but it is firmly considered that a minimum wage

is not the correct solution.

(i) A "safety net minimum wage set slightly above the Public Assistance standard

Please see my comments in paragraph 8 åbove. The very existence of a safety net in the public assistance scheme considerably weakens the argument for a minimum wage. The real level of PA will be increased by 25 percent with effect from 1 July 1981.

(j) Unions will have a significant role to play

in enforcing a statutory minimum wage

The argument for enhancing the status of trade unions is outweighed by the obvicus disadvantages to the Hong Kong economy of collective bargaining through: trade unions: a less flexible lat cur market, a less flexible