Use the case of the recent legislation of the minimum wage to discuss the positive function and negative function of the social policy in Hong Kong society. 

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Recently, starting from May 1, 2013, Hong Kong had issued an increase of the Statutory Minimum Wage (SMW) from $28 to $30. Setting SMW at an appropriate level is vital to striking the balance between the objectives of forestalling excessively low wages and minimising the loss of low-paid jobs, while sustaining Hong Kong’s economic growth and competitiveness ("2012 report of the minimum wage commission," 2012). To fulfil this aim, the government have decided to increase the minimum wage rate in order for the people receiving the low-paid jobs to have a more fair salary.

This paper will first discuss about the stakeholders that will be affected by the increase of the wage rates namely the workers earning the SMW rates, …show more content…

Because most of their staffs are earning minimum wage, the firms will either need to either reduce the working hours of their employees or face an increase in the labour cost. If the businesses were to reduce the employees or the working hours, the quality of the products or services provided will most likely degrade over time due to the lack of labour. On the other hand, maintaining the same amount of labour and working hours will lead to an increased cost. In order for the firms to maintain their profitability, the prices of the product or services will most likely be increased. This will lead to the reduction of the competitiveness of small and medium firms compared to the large firms. Because large firms can most likely afford the increase of the minimum wage, they might not need to push the prices up to keep their demands. This can be disadvantageous to Hong Kong as a whole if it leads to the closure of the small and medium firms which leaves huge industries as monopolies in the industry. Card (1995) mentioned that the minimum wage has a “ripple effect” in many firms, leading to pay increases for workers initially earning slightly more than the new minimum wage. Because of this, the effects previously mentioned will be amplified even to firms which pay slightly above the new SMW even before the increase.

Government In the government’s perspective, the increase of the minimum wage policy can help reduce the government expenditure in a country.

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