The Demise of the Free Market Way

Hong Kong has long been considered one of the freest places in the world to do business where business people enjoy low taxes, zero tariffs and facilitated civil services. As The Economist magazine put it in 1977, when free market faith reached its peak: “A businessman setting up shop in Hong Kong finds low taxes, no foolish government inferences…a government leaning over to encourage him to make as much money as he can. He finds, blessed discovery, no politics. ” Milton Friedman once described Hong Kong as the world’s greatest experiment of laissez-faire capitalism.

However, a decision made by the legislature last year has turned this free market haven into a woeful place for employers and even ordinary families. The legislature voted to pass a bill that for the first time in Hong Kong’s history adopted a minimum wage. The bill requires the governor of Hong Kong to pick a pay floor between HK$24-33(US$3.3-4.2) per hour. But every individual so different that he/she has a prospect of what a minimum rate he/she is willing to accept. A one-size-fits-all statutory minimum wage, no matter the rate, will cost people jobs and choke off the economy.

Introducing a minimum wage law in Hong Kong  not only spurs fears of shutting down businesses to the employers but also affects lives of thousands of families, and gets more government oriented regulations involved in the process of employment. First, unlike the U.S., where everyone who has an income pays pay roll taxes, income tax in Hong Kong is paid only by those who make above HK$100,000, and approximately 60% of the population pays nothing. Before this legislation was passed, small businesses were free to employ without filling out onerous and complicated taxes forms.  Now those employers are suggested to report to the government how much they pay to employees, raising concern that increasing risks of facing labor lawsuits boost the cost of operating businesses.

Second, adopting a minimum wage law affects thousands of households as well.  In Hong Kong, young parents are under so much pressure working during the weekday that they don’t have much time to take care of toddles. Thus it’s common for them to hire young female Filipinos at low wages as nannies to fill the job of babysitting. . Filipinos girls willingly accept a range of HK$15-25(roughly US$2-3) per hours which is much higher than the rate of US$1 per day that they can earn in Philippine. They used to be very happy and satisfied with such low wages. If you take a walk along sidewalks of both sides of the Victoria Harbor on Sunday, you will see many of small groups of Filipino girls sitting on grass in the park near the harbor, singing exotic songs and chatting with vigorous laughs. Sunday is the only day for these foreign aliens to get together and relax. Thus many of Filipinos girls with bachelor’s degree flee to Hong Kong to earn money and send it back to support their families in this unimaginable way. Many would wonder how those girls survive in a big city with skyrocketing rent. But yes, they are able to do so. For example, most of the Filipinos stay with the host families all the time because of the need to babysitting, and cook for and eat with the family without costing their own money. Unfortunately, the incentive to employ Filipinos is fading away in light of enforcement of the new law which has completely changed the lives of most Filipinos. Without being hired anymore, those girls have to leave Hong Kong for other places in search of other employment opportunities. Employment which makes both sides better off has been turned upside down by the minimum wage law, leaving Hong Kong family no way to hire nannies with a wage acceptable by both parties and plenty of Filipinos families remaining in poverty.

Despite the fact that Hong Kong by far remains a vibrant place for both entrepreneurs and workers, the belief in Adam Smith has begun to lose its popularity and move to a jeopardizing direction.  A government that does things for the “good” for people usually ignores the danger of missing the forest for the trees.





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