Trade Union points out household income falling below Comprehensive Social Security Assistance threshold based on minimum wage calculation

Insert picture: Anthony Yau Yiu-shing.

24th May 2024 – (Hong Kong) The Chief Executive-in-Council announced in April 2024 that it has accepted the recommendations put forth by the Minimum Wage Commission regarding the enhancement of the review mechanism for the statutory minimum wage (SMW). These recommendations include conducting a yearly review of the SMW rate.

As part of the accepted recommendations, a formula will be adopted to implement the annual review, ensuring a systematic approach to evaluating the SMW rate. Additionally, it has been decided that the new mechanism will be reviewed five to ten years after its implementation, allowing for further adjustments and improvements.

The Government has stated that the first SMW rate derived from the new mechanism will come into effect on 1st May, 2026, providing clarity on the timeline for its implementation.

However, despite these developments, concerns have been raised by various groups regarding the adequacy of the minimum wage. According to some organisations, the current minimum wage level is still considered too low and fails to keep pace with inflation, thereby undermining the value of labour. The formula used to calculate the minimum wage has also faced criticism for its high threshold in terms of considering the “sharing / collaborative economy factor” of the sharing economy, which has resulted in many low-income workers being unable to benefit from the economic gains.

Anthony Yau Yiu-shing, Vice Chairman of the Hong Kong Federation of Trade Unions, highlighted the discrepancy between the cumulative increase in the minimum wage and the rise in the consumer price index. Despite a 42.9% increase in the minimum wage from 2011 to 2023, the consumer price index for the same period registered a cumulative rise of 44.7%. Yau argued that this disparity demonstrates a long-term failure of the minimum wage to keep up with inflation, emphasizing the need to address the issue of a low baseline for the minimum wage level.

Wong Chi-hung, Vice Chairman of The Hong Kong General Union of Security & Property Management Industry Employees, pointed out that the average monthly Comprehensive Social Security Assistance (CSSA) payment for a four-person household has reached HK$18,660 in 2024. In contrast, if the minimum wage were calculated at HK$42.9 per hour, two full-time workers in a four-person household, working 26 days a month and eight hours a day, would earn only HK$17,846.4, falling below the CSSA payment.

Moreover, concerns were raised about the “sharing / collaborative economy factor” within the formula, which sets a lower limit of 0%. While this safeguard prevents wage cuts during economic downturns, it also creates a high threshold for sharing the economic benefits of the sharing economy, leaving many low-income workers unable to reap its rewards. Analysis conducted by Yau indicated that, between 2011 and 2023, the “sharing / collaborative economy factor” component of the formula was negative or close to 0% for the majority of the years, suggesting that the formula has not effectively facilitated the sharing of economic gains.