Minimum Wage in Hong Kong

Scope of Paper

This paper is designed to illustrate the implementation of a statutory minimum wage in the special case of Hong Kong – characterized by a very free, lightly regulated economy. After more than a decade of debates and controversy, the Legislative Council of Hong Kong eventually passed the Minimum Wage Ordinance on July 17, 2010. The introduction of a minimum wage in Hong Kong is particularly controversial since the Special Administrative Region’s success and prosperity is based on the principles of the free market. This paper is based on this background and is organized in the following way. Part one is about the economic and political uniqueness of Hong Kong. Part two illustrates minimum wage theory. The concept and process of implementation of the statutory minimum wage is explained in the 3rd section. In section four the situation after the implementation and effects are described and this is followed up by a conclusion. 

Situation before implementation of minimum wage

At the end of the occupation of Hong Kong by the UK in 1897, Hong Kong was handed over to the UK by China for a time span of one hundred years. In 1997 Hong Kong was formally returned to the People’s Republic of China and became one of few Special Administrative Regions.

As part of the handover, an agreement was signed between China and the UK. The main objective of this agreement was that the ruling communist party in China guaranteed to implement a "one country, two systems" formula in Hong Kong. This involved a highly autonomy status of Hong Kong with a free economy as well as an own government and political system. This agreement would last for the coming 50 years, hence until 2047.

Nowadays Hong Kong Special Administrative Region (HKSAR) belongs to the freest economies in the world. According to the Index of Economic Freedom published annually by the Heritage Foundation, Hong Kong tops the ranking as the freest economy in the world. In this ranking HKSAR ranks way...