Legislative Council

LC Paper No. CB(2) 920/98-99
(These minutes have been seen
by the Administration)

Ref : CB2/PL/MP/1

LegCo Panel on Manpower

Minutes of meeting held on Thursday, 29 October 1998 at 2:30 pm in the Chamber of the Legislative Council Building Members present:

Hon LEE Kai-ming (Chairman)
Hon LAU Chin-shek, JP (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon James TIEN Pei-chun, JP
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon LEE Cheuk-yan
Dr Hon LUI Ming-wah, JP
Hon Ronald ARCULLI, JP
Hon CHAN Kwok-keung
Hon CHAN Yuen-han
Hon CHAN Wing-chan
Hon CHAN Kam-lam
Hon LEUNG Yiu-chung
Hon SIN Chung-kai
Hon Andrew CHENG Kar-foo
Hon SZETO Wah

Members absent:

Hon Michael HO Mun-ka
Dr Hon LEONG Che-hung, JP

Public Officers attending:

Item III

Mr Matthew K C CHEUNG, JP

Deputy Secretary for Education and Manpower

Ms Esther LEUNG

Principal Assistant Secretary for Education and Manpower

Mr TANG Kwong-yiu

Government Economist

Mr TSANG Kin-woo

Assistant Commissioner for Labour

Item IV

Mr Matthew K C CHEUNG, JP

Deputy Secretary for Education and Manpower

Ms Esther LEUNG

Principle Assistant Secretary for Education and Manpower

Mr LEUNG Min-cheung

Senior Labour Officer

Attendance by invitation:

Item III

Hong Kong Social Security Society

Mr Henry MOK

Vice-Chairperson

The Federation of Hong Kong & Kowloon Labour Unions

Ms NG Wai-yee

Education and Publicity Officer

Mr LI Keung-tsang

Project Officer

Hong Kong Confederation of Trade Unions

Mr MAK Tak-ching

Organising Secretary

Ms MIU Sze-man

Organising Secretary

Employers' Federation of Hong Kong

Dr Kim MAK

Deputy Chairman of Employee Relations
and Legislation Issues Committee

Ms May CHOW

Executive Director

The Hong Kong Construction Association Ltd

Mr Jimmy TSE

President

Mr Patrick CHAN

Secretary General

The Hong Kong General Chamber of Commerce

Mr POON Yun

Chairman of Chamber's Human Resources Committee

Mr Peter BARRETT

Managing Director of Organisation Development Ltd

Mr FOO See-luan

Human Resources Director of BOC Gases
(North Pacific) Ltd

Federation of Hong Kong Industries

Mr Carson CHAN

Director

Mr Roger TAM

Senior Administrative Officer

The Chinese General Chamber of Commerce

Mr KAN Wai-wah

Committee Member

Mr Peter WONG Man-kong

Vice-Chairman

Clerk in attendance:

Mrs Sharon TONG

Chief Assistant Secretary (2)1

Staff in attendance:

Ms Lolita NG

Senior Assistant Secretary (2) 5

I. Confirmation of minutes of meeting held on 24 September 1998
(LC Paper No. CB(2) 496/98-99)

The minutes were confirmed.

II. Date of next meeting and items for discussion
(LC Paper No. CB(2) 495/98-99(01))

2. As the regular meeting originally scheduled for 25 March 1999 would clash with the Legislative Council (LegCo) meeting, the Chairman suggested and members agreed that the meeting be rescheduled to Tuesday, 23 March 1999 at 2:30 pm.

3. Members noted that the Member's bill on age discrimination to be introduced by Hon LAU Chin-shek needed to be deferred till further notice because the Administration was clarifying the bill with Mr LAU Chin-shek.

4. The Panel resolved to discuss the following four items at the next Panel meeting on 26 November 1998 :

1. Progress of measures to create jobs and tackle unemployment;

2. Guidelines for handling wage reductions and retrenchments;

3. Review of working time arrangements; and

4. Impact on existing employees and prospective employers upon change of franchise of public enterprise.

   (Post-meeting note : At the request of the Administration, item (c) was deferred to a future meeting.)

5. On item at para. 4(a) above, Deputy Secretary for Education and Manpower (DSEM) said that the Administration would like to report regularly on the work progress of the Task Force on Employment. In this regard, members agreed that the subject would be on the agenda of future meetings until further notice. In relation to the item at para. 4(b) above, the Administration tabled a booklet entitled "Guidelines on what to do if wage reductions and retrenchments are unavoidable" for members' reference. Mr SZETO Wah suggested and members agreed to discuss whether the guidelines were effective to safeguard the interests of employees. Upon members' request, the Administration would inform members of the number of disputes handled by the Labour Department (LD) involving unilateral wage reductions by employers since the issue of the guidelines.

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6. Referring to the information paper on minimum wage issued by the Administration shortly before the meeting, the Chairman reminded the Administration that in order to facilitate circulation of papers to members, the Administration should forward its papers to the LegCo Secretariat seven days prior to a meeting. The Administration undertook to comply with the requirement as far as possible.

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III. Proposal for a minimum wage in Hong Kong Meeting with deputations

7. The Chairman reminded the representatives of the deputations that they were not covered by the protection and immunity provided under the LegCo (Powers and Privileges) Ordinance (Cap. 382).

Hong Kong Social Security Society (HKSSS)
(LC Papers No. CB(2) 87/98-99(01))

8. At the request of the Chairman, Mr Henry MOK briefed members on HKSSS's proposal to introduce a minimum wage of $ 5 850 per month in Hong Kong as contained in the written submission of HKSSS. He also tabled one page of statistical information and two newspaper cuttings at the meeting. Referring to the written submissions of the employers' associations (except LC Paper No. CB(2) 514/98-99 which being the written submission from The Real Estate Developers Association of Hong Kong and was restricted to members only), he addressed the concerns of the commercial and industrial sector and responded to the views of the Administration presented in its information paper. His additional views were as follows -

1. a cut in the rental of commercial premises would be more effective than wage reductions in reducing the operational costs of companies according to the findings of a recent survey conducted by HKSSS on shop owners; and

2. the Administration's calculation from which the poverty line was mapped out was not forward looking as it was based on old figures. He did not agree to the estimate that only 18% of adult members in the poorer households and hence, low-wage earners would benefit from the establishment of a minimum wage system (MWS) in Hong Kong.

The Federation of Hong Kong & Kowloon Labour Unions (FHKKLU)
(LC Paper No. CB(2) 495/98-99(02))

9. Representatives of FHKKLU presented their views to support the setting up of a MWS in Hong Kong as outlined in FHKKLU's written submission. They did not agree to the view of some employers' associations that minimum wages, if set lower than the market rate, would become maximum wages of the workers. In their opinion, irrespective of the existence of a MWS, local employers would provide workers with wages basing on the market rate, with consideration given to the job nature and the job requirements.

Hong Kong Confederation of Trade Unions (HKCTU)
(LC Paper No. CB(2) 495/98-99(03))

10. In addition to its written submission, HKCTU tabled a paper to respond to the views of the employers' associations. Mr MAK Tak-ching presented the points therein to support the setting up of a MWS in Hong Kong.

Employers' Federation of Hong Kong (EFHK)
(LC Paper No. CB(2) 456/98-99(01))

11. Representatives of EFHK presented the salient points of EFHK's written submission to argue against the establishment of a MWS.

The Hong Kong Construction Association Ltd. (HKCA)
(LC Paper No. 362/98-99(01))

12. Mr Jimmy TSE presented HKCA's position to oppose the introduction of a MWS. In addition to the views in the written submission of HKCA, he said that it would not be meaningful and practical to adopt a minimum wage in the construction trade. In the light of the employers' experience, the construction trade could not recruit enough unskilled workers even in times of a blooming economy, although they offered wages higher than payments of the Comprehensive Social Security Assistance Scheme.

The Hong Kong General Chamber of Commerce (HKGCC)
(LC Paper No. CB (2) 495/98-99(04))

13. Representatives of HKGCC highlighted the salient points of HKGCC's written submission to argue against the setting up of a MWS. They said that it was not practicable to adopt a uniform minimum wage for all trades across-the-board while there were variations in wages even for the same trade in different districts. In their opinion, workers should be provided with training so that they could become more competitive in the employment market, hence capable of earning higher wages eventually.

Federation of Hong Kong Industries (FHKI)
(LC Paper No. CB (2) 510/98-99(01)

14. Mr Carson CHAN briefed members on the views of FHKI as detailed in its written submission to object the establishment of a MWS.

The Chinese General Chamber of Commerce (CGCC)
(LC Paper No. CB (2) 480/98-99(01))

15. Representatives of CGCC presented their views as contained in CGCC's written submission, objecting the setting up of a MWS in Hong Kong.

16. In response to Mr CHAN Kam-lam, Mr Henry MOK confirmed that HKSSS was proposing one single statutory minimum wage across-the-board for all trades and industries. Responding to Mr CHAN Kam-lam's further question, he said that implementation of a MWS would not affect the productivity of the local trades and industries adversely. As there was already consensus on wages in some trades, employers and employees might jointly work out an agreeable minimum wage for a certain trade above the statutory minimum wage. As such, it would not be necessary for the Government to stipulate the minimum wage for these trades.

17. Mr Kenneth TING opined that wages should be determined by the forces of supply and demand in the labour market. Referring to New Jersey of the United States of America (USA), he pointed out that the unemployment rate soared after the minimum wage was increased. In response, Mr MAK Tak-ching said that such a situation would not occur in Hong Kong because companies in Hong Kong had been operating with the least minimum manpower and retrenchment of staff would not be possible. Responding to a follow-up question from Mr Kenneth TING, Mr Henry MOK expressed his view that the introduction of minimum wage would not lead to higher operational costs, resulting in the close down of business. In his opinion, companies closed down their operations as a result of competitiveness in the market. The local unemployment rate would not rise as companies with higher competitiveness and efficiency would absorb the businesses of the less competitive ones in the commercial market.

18. In response to Mr Andrew CHENG, Ms May CHOW reiterated the view of EFHK that wages should be determined by a free market, which had its own way of balancing the demand and supply of labours. Factors such as employees' productivity, competency, ability and operations of the concerned companies determined the wage level. Only those who were less competitive in the labour market would benefit from minimum wages. As there were demands, housewives and teenagers were able to obtain part-time jobs in fast-food shops, supermarkets etc. However, they would be pushed out from the employment market after the imposition of minimum wages. In this connection, Mr Henry MOK said that the present unemployment rate of young people was more related to the market situation instead of their abilities or competencies. In response to Dr LUI Ming-wah, Mr Henry MOK considered that there would not be a higher unemployment rate after the introduction of a MWS in Hong Kong.

19. Responding to Miss CHAN Yuen-han as to how employees' interests could be safeguarded, Mr Peter WONG clarified that CGCC did not find the existing wages unfair. In CGCC's opinion, an effective mechanism should be put in place to balance the interests of employers and employees and the adequacy of protection provided by the existing system should be reviewed.

20. Referring to EFHK's written submission, Mr LEE Cheuk-yan asked whether EFHK would support setting up a MWS during a blooming economy. In response, Ms May CHOW clarified that this was not what EFHK implied. EFHK considered that at the present moment of an economic downturn, employers and employees should co-operate with a view to reviving the local economy.

21. Regarding the issue of providing social security by having in place a system of minimum wages, Ms May CHOW explained that though in recognition of a social responsibility role on the part of employers, EFHK did not agree that social security should be a prime consideration for determining wages. Having a limited role to play in terms of social security, employers should not shoulder the government's responsibilities in providing a basic standard of living to workers and their families. In response to Mr LAU Chin-shek, Ms May CHOW further said that EFHK would not support a deliberate action of an employer to exploit his employers by giving them unreasonably low wages. She pointed out that the market wages of some job types were not high and employers just paid the market wages accordingly.

22. Mr James TIEN asked if HKSSS had conducted a survey among employers of small and medium sized enterprises on whether they could afford to pay the proposed minimum wage. Mr Henry MOK replied that such a survey might be conducted in November 1998. He added that according to the findings of the survey mentioned in para.8(a), employers preferred cuts in rents to wage reductions so as to trim down the production and operational costs. Given a 20% cut in rents, the employers would be able to pay the proposed minimum wage to their employees.

23. In response to Mr LAU Chin-shek, Mr POON Yun said that while not envisaging the need, CGCC would not conduct a study to examine if employers would close down their operations because of the establishment of a MWS in Hong Kong.

Response of the Administration
(LC Paper No. CB(2) 495/98-99(05))

24. DSEM took members through the information paper, emphasizing that it was not worthwhile to tinker with the market-determined wage mechanism - a cornerstone of a free market economy - by setting up any form of MWS in Hong Kong. He highlighted the following -

1. While the HKSSS's proposal to set up a system of minimum wages in Hong Kong was good-intentioned and might apparently have some limited immediate benefits of reducing poverty and improving income distribution, the merits would be more than offset by the very heavy costs it would incur. Such costs would lie mainly in the consequential reduction of employment opportunities, especially for the less skilled and lower-paid workers, and the distortion of the well-tried and time-tested system of market-driven wages which underpinned Hong Kong's success as one of the world's most open and flexible free market economies; and

2. The National Wages Council (NWC) which HKSSS proposed to establish in Hong Kong, was set up by the Singaporean Government in 1972 with a view to ensuring "an orderly wage increase", against the background of a tightening labour market and rising wage expectations. The primary objective was therefore not to impose a minimum wage, but rather to contain wage increase. The Chairman of NWC wrote in an article in January 1998 that NWC was against wage indexation and minimum wage as both measures introduced inflexibility into the wage system. In recent years, NWC had ceased to produce quantitative wage increase guidelines. Instead it tended to issue qualitative guidelines, which emphasized the relationship between wage increase and productivity. It was therefore not appropriate to apply the model for the purpose of determining minimum wage in Hong Kong.

25. Government Economist (GE) advised that the Administration had examined the impact of statutory minimum wage on poverty, employment of particular groups , and income distribution, with reference to the major findings of a recent study conducted by the Organization for Economic Co-operation and Development (OECD). The following results reinforced the Administration's view that it was not appropriate to impose a statutory minimum wage -

1. statutory minimum wage had only minor effect in reducing poverty;

2. statutory minimum wage could lead to a reduction in employment opportunities among the less skilled workers, e.g. teenagers; and

3. statutory minimum wage had limited effect in evening out income distribution.

26. Pertaining to earlier questions on the OECD study, GE said that -

1. the unemployment problem would deteriorate if a MWS was introduced in Hong Kong;

2. countries where minimum wages were implemented tended to relax wage control with an aim to raising employees' productivity;

3. Singapore had, in the 1980's, attempted to adopt a high wage policy in the hope that this would push up productivity of the country. However, this put the causation wrongly and, eventually because of the economic downturn, Singapore finally had to give up implementing the high wage policy; and

4. hence wages should be set by the market in close relation to employees' productivity. It was undesirable to push wages artificially by statutory means.

27. In response to Mr LEE Cheuk-yan, GE advised that according to OECD's definitions, poor households (or families) were those with per capita household income of less than half the median income and low-wage workers were those who earned less than two-thirds of the overall median employment earnings. Adopting such definitions, only about 150 000 or 18% of the existing 700 000 adult members in the poorer households were low-wage workers earning less than $6 700 per month. Superficially, these people could benefit from the introduction of a minimum wage in Hong Kong. However, this would be subject to the affordability of the employers or the corporations to pay the proposed minimum wage. If they were unwilling or unable to employ the workers, the latter could not earn any wage at all, not to mention a higher wage with a MWS.

28. Referring to the Supplementary Labour Scheme (SLS), Miss CHAN Yuen-han commented that the Government was practising a planned economy instead of a free market economy when fixing the wages of some trades and industries. DSEM responded that the median monthly wages for job titles under the SLS applied only to imported workers for the purpose of preventing the displacement of local workers by "cheap" labour from abroad. Such median monthly wage figures were compiled on the basis of monthly wages of local workers in comparable positions in the market. One should therefore not mix up a statutory minimum wage with a non-statutory median wage as in SLS. In response to Miss CHAN Yuen-han's follow-up question, DSEM said that it would not be appropriate to impose a statutory minimum wage in Hong Kong.

29. In response to Mr James TIEN, GE advised that a statutory minimum wage would arouse unemployment if it were set above the market equilibrium rate, or else would be non-functional if it were set below the market equilibrium rate. For those countries where minimum wages prevailed, it would hence be necessary to study on what levels the minimum wages were fixed.

30. Mr Andrew CHENG was of the view that despite the implementation of minimum wages, some countries remained to have their free market economic system intact. He questioned the Administration's rationale for not supporting a MWS in Hong Kong. In response, GE said that while the Administration's stance on this issue indeed fell in line with the employers' side, it was based on rational economic arguments. As regards a MWS in a primarily free market economy, he pointed out that the European countries towards the implementation of the Euro saw the need to relax wage controls, and that the United States, having gone through an effective economic restructuring in the early part of the 1990s, was now able to cushion higher wages with its strong economic growth. However, Hong Kong was now facing an economic downturn.

31. Mr LEUNG Yiu-chung said that the Trade Boards Ordinance (TBO) was enacted in 1940 to introduce a wage council in Hong Kong. He queried why the Administration allowed TBO to exist if it was not in support of a statutory minimum wage. DSEM advised that TBO had never been used since its enactment on 21 June 1940. TBO was a historical left-over as it was enacted with reference to a similar ordinance in the United Kingdom in the 1930's. The Administration would not rule out repealing TBO at an appropriate time.

32. As to a study on minimum wage by the Administration, DSEM wondered if it would be worthwhile to spend resources for conducting the study, taking into account that it was not appropriate to set any form of minimum wage in Hong Kong. The Chairman suggested and members agreed that a study on overseas experience in respect of a MWS be conducted by the Research & Library Services Division of the LegCo Secretariat, covering the following areas -

1. a list of overseas countries which had adopted a system of Minimum wages;

2. how the levels of minimum wages are determined in those countries;

3. how the system of minimum wages in those countries had been implemented so far, such as whether any disputes or problems had arisen in the course of and after implementation;

4. whether the adoption of a MWS in those countries could achieve the merits as put forward by HKSSS in para. 8 of its proposal; and

5. information on wage councils in those countries.

IV. Progress of measures to create jobs and tackle unemployment
(LC Paper No. CB(2) 495/98-99(06))

33. DSEM said that some positive signs, such as stabilization of the property price, improvement of the external economic factors and lowering of the interest rate, showed that the unemployment situation appeared to have stabilized, while the rate of underemployment had decreased from 2.6% to 2.5%. However, the Administration would continue with its efforts to ease unemployment by all possible means. While the 19 measures announcent by the Task Force Employment had been implemented, the Administration would continue to explore additional measures to tackle unemployment and create jobs if necessary.

34. At the request of the Chairman, DSEM briefed members on the progress of the measures adopted by the Task Force on Employment as follows -

1. As regards job creation, of the 100 000 new jobs expected to be created from May 1998 to end 1999, some 15 000 jobs had been created as at mid-September 1998. Those 15 000 jobs included some 3 000 civil service posts which had been filled as at early July 1998, and around 12 000 non-government jobs which had been created as a result of various projects and measures the Government had implemented by mid September 1998. Some 21 000 additional jobs in the non-government sectors were expected to be created between mid-September 1998 and end-1998. As the statistics were estimated in May and June 1998, they were subject to changes because of new initiatives and commitments announced in the 1998 Policy Address and other new ventures in the non-government sector, e.g. extension of MTR to Tseung Kwan O, new rail project in Ma On Shan, etc. The Government would produce a comprehensive update on the job creation assessment by the end of 1998, taking into account the initiatives and commitments announced in the 1998 Policy Address;

2. There had been some misunderstanding in the community that the Government was slow in creating new jobs. In addition to the aforesaid 100 000 posts which would be created largely as a result of the Government's key policy initiatives and major infrastructure or other projects, there were other new jobs created by the extra measures mentioned in P.2 - 4 of the information paper, viz. expediting expenditure on minor government projects, advancing commencement of public work projects, expanding and accelerating district-based environmental improvement projects, direct grant of the former Tamar Site to the Hong Kong Tourist Association for facilitating the staging of recreational, entertainment and tourism-oriented activities and major repair and maintenance works for aided schools.

3. LD continued to strengthen and improve its employment and job matching service. Under the Job Matching Programme (JMP), there were, on average, about 4 000 unemployed were placed in jobs each month. On-going provision of the telephone and vacancy processing service facilitated job-seekers to make direct contacts with employers since they were not required to turn up in the Local Employment Service (LES) offices. The installation of additional self-service touch screen computers at all LES offices and Labour Relations Service offices from October 1998 onwards would also be useful to job-seekers ;

4. On enhancing vocational training and employees retraining, the Vocational Training Council (VTC) and the Employees Retraining Board (ERB) had commenced their training courses. Under the retraining-cum-job matching programmes for domestic helpers and child-minders operated by ERB, 700 employers had registered for the programmes and 176 retrainees had been placed as domestic helpers subsequently. The result was encouraging. In fact, the Administration found that there was a huge potential for creating new jobs in this sector. In order to publicize the training, a marketing flyer had been developed and would be issued in late October 1998. An announcement of Public Interest (API) on Employees Retraining Scheme with a special focus on domestic helpers training would feature on television with effect from 19 October 1998; and

5. As regards the provision of HK$2.5 billion to help small and medium sized enterprises to obtain loans from lending institutions, a total of 244 applications had been received as at 24 October 1998. With the exception of two applications which had been withdrawn by the applicants, all of the applications had been approved with the loan amounted to $404 million.

35. Responding to Miss CHAN Yuen-han, DSEM said that -(a) the Task Force on Employment, chaired by the Financial Secretary, was monitoring the progress of the 19 measures implemented by the bureaux and the government departments to create jobs and tackle unemployment. The Secretaries of the bureaux, including the Trade and Industry Bureau (TIB), the Works Bureau and the Education and Manpower Bureau, and the department heads attended meetings of the Task Force. Monthly update on the improvement measures to the Panel on Manpower served as a means to monitor its progress; and(b) the one-stop service, comprising a centrally managed telephone hotline and referrals by ERB, had enabled more job-seekers, particularly women, to secure domestic helper and child-minder jobs. Publicity efforts on marketing and training for domestic helpers would be stepped up with the aim of enhancing jobs creation in this market.

36.Referring to item 7 in P.4 of the information paper, Mr LEE Cheuk-yan observed that the number of job vacancies under LES tended to decrease, as indicated by a total of 3 449 vacancies in September 1998 but just 1 688 vacancies from 1 to 20 October 1998. Furthermore, the telephone referral service had a success rate as low as 4-6%. Such a low success rate would discourage job seekers, thereby pushing them away from the labour market. Senior Labour Officer (SLO) explained that the success rate of the telephone referral service was adversely affected because some registrants had failed to attend job interviews. At present, registrants had more choices of job vacancies as they could contact employers directly. Nevertheless, the service remained to be popular among job-seekers who found it convenient and time-saving. At the request of Mr LEE Cheuk-yan, the Administration agreed to provide a written reply on the success rate of the telephone referral service, indicating the number of registrants who had been referred to attend job interviews and the number of registrants who had actually attended the job interviews.(Post-meeting note : The Administration advised that the vacancy figures quoted by Hon LEE Cheuk-yan were numbers of open vacancies (i.e. employers of these vacancies have agreed to put their names and contact means on the job cards displayed in the LES offices and in the Internet) received by the LES. The LES in the months of September and October 1998 actually received a total of 10 666 and 7 992 vacancies respectively.)

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