Hong Kong Aff
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- No internal link – low wages play almost no role in location
- Counterplan Misc DAs
- Minimum wage policy is key to Hong Kong economic stability – only the plan preserves resilience
- Any other adjustment mechanism increases market inflexibility and means shocks are more damaging
- Hong Kong’s economy is key to the global economy – volatility deters investment and trade
- Only the plan is resilient to tightening monetary policy
- Prefer this evidence – large data set of 31 variables and 25 years as well as a comparison against the US as a baseline
- No indexation means wages can’t adjust to shocks
- No indexation empirically means shocks are more damaging and cause a decrease in employment and productivity
- Indexation to consumption/consumer prices/commodity prices adjusts prices the wrong way
HW Outsourcing DAA2 OutsourcingNo plan-specific evidence – their uniqueness card is about China and link evidence is not about eitherPoverty advantage link turns this – their outsourcing argument assumes the increase in labor costs will cause jobs to shift from Hong KongNo internal link – low wages play almost no role in locationCastree 04 [Noel Castree, Neil M. Coe, Kevin Ward and Michael Samers. “Spaces of Work: Global Capitalism and the Geographies of Labour.” SAGE Publications 2004] AJ The fifth myth is directly related to the fourth: it’s the myth of cheap labour. In this myth, firms with the capacity to choose between several possible production sites ultimately gravitate to places with the lowest labour costs. This myth goes back to the 1960s and 1970s, when a number of TNCs relocated factories to the Far East from Western Europe and North America marking the emergence of a so- called ‘new international division of labour’ (Fröbel et al., 1980). It’s a particularly egregious myth because the locational decisions of capi- talist firms are infinitely more complex than simply seeking out cheap workers. The skill levels, compliance, initiative and work-rate of labourers are all vitally important, as are the regulatory environment and relative location of the place being considered. Nonetheless, the myth of cheap labour exerts a powerful hold. It’s become a shorthand for the ‘war among workers’ that supposedly prevails when the costs of labour vary so radically between places in the ‘first’, ‘second’ and ‘third’ worlds. CounterplanMisc DAsRegs badBusinesses would perceive further regulations as negative – kills investmentIDF 15 [(Index of Economic Freedom) “Hong Kong” Country Rankings, 2015] AT However, the economy’s institutional uniqueness, enshrined in its exceptional commitment to economic freedom and a high degree of autonomy pledged by the mainland, has faded a bit. Although Hong Kong maintains the features of an economically free society, economic decision-making has become somewhat more bureaucratic and politicized, and the government’s administrative scope and reach have expanded. Recent political events appear to have undermined public trust and confidence in the administration. Hong Kong became part of the People’s Republic of China in 1997, but under the “one country, two systems” agreement, China promised not to impose its socialist policies on Hong Kong and to allow Hong Kong a high degree of autonomy in all matters except foreign and defense policy for 50 years. The critical issue today is the shape and form that “universal suffrage,” promised for 2017 by Chinese authorities, will take. Although the government controls all land in Hong Kong, the economy has benefited from its commitment to small government, low taxes, and light regulation. Major industries include financial services and shipping; manufacturing has largely migrated to the mainland. Hong Kong’s economy has become increasingly integrated with China through trade, tourism, and financial links. RULE OF LAWVIEW METHODOLOGY Property Rights 90.0 Create a Graph using this measurement Freedom From Corruption 75.0 Create a Graph using this measurement Hong Kong continues to enjoy relatively low rates of corruption, although business interests exercise a strong influence in the unicameral legislature and executive branch. Beijing’s heavy-handed efforts in 2014 to assert greater control from the mainland have galvanized pro-democracy sentiments. The rule of law is respected, and the efficient and capable judiciary remains independent. Property rights are well protected. LIMITED GOVERNMENTVIEW METHODOLOGY Government Spending 89.7 Create a Graph using this measurement Fiscal Freedom 93.2 Create a Graph using this measurement The standard income tax rate is 15 percent, and the top corporate tax rate is 16.5 percent. The overall tax burden equals 13.7 percent of domestic income. Government expenditures amount to 18.5 percent of gross domestic product. Public debt is low, and a budget surplus has been maintained, but population aging and greater spending on social programs have increased fiscal pressures. Inflation PICGeneric Plan KeyMinimum wage policy is key to Hong Kong economic stability – only the plan preserves resiliencePorter 8 [(Nathan, desk economist covering China at the International Monetary Fund, was the Fund's main economist analyzing Hong Kong SAR's economy, Senior Economist at the Australian Treasury) “The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR” IMF working paper 08/285] AT As a relatively small and open economy, serving as an intermediating hub for international trade and investment flows, Hong Kong SAR is considerably exposed to shocks transmitted via trade and financial channels. Adjustment to these shocks has historically relied heavily on the flexibility of domestic goods, labor, and asset prices, given that its rigid exchange rate arrangement (the Linked Exchange Rate System) precludes a stabilization role for monetary policy, and with fiscal policy constrained by lags and constitutional limits. In other words, the monetary and fiscal arrangements in Hong Kong place a premium on this market flexibility. Consequently, the introduction of the minimum wage should be done in a way which preserves Hong Kong’s domestic price flexibility. We find that introducing a minimum wage in Hong Kong SAR has the potential to elevate macroeconomic volatility and distort the dynamic response of the economy to shocks. Indeed, introducing a minimum wage which binds for 20 percent of households is estimated to amplify the volatility of output over the business cycle by 0.2 percent to 9.2 percent, and of employment by −1.2 percent to 7.8 percent. These wide ranges reveal the sensitivity of the effects of introducing a minimum wage to the mechanism for adjusting it over time. We also find that the resilience of the economy of Hong Kong to shocks affecting its external price competitiveness can be largely preserved through judicious choice of the mechanism for adjusting the minimum wage over time. In particular, indexation of the minimum wage to aggregate wage inflation is found to dominate alternative adjustment mechanisms, with no indexation or indexation to consumption price inflation particularly boosting volatility. This result is robust to variation in the coverage of the minimum wage and the source of business cycle fluctuations. Any other adjustment mechanism increases market inflexibility and means shocks are more damagingPorter 8 [(Nathan, desk economist covering China at the International Monetary Fund, was the Fund's main economist analyzing Hong Kong SAR's economy, Senior Economist at the Australian Treasury) “The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR” IMF working paper 08/285] AT By reducing labor market flexibility, introducing a minimum wage impedes the restoration of external price competitiveness following shocks. However, the size of these impediments may be expected to vary depending on the source of business cycle fluctuations. Estimated impulse responses of key output and labor market variables in Hong Kong SAR to a variety of nominal and real shocks originating domestically and abroad are compared in Figures 3−8, across alternative mechanisms for adjusting the minimum wage over time. In particular, we consider the impulse responses of output price inflation, output, wage inflation and employment to the following shocks: domestic and foreign supply shocks, domestic and foreign demand shocks, and domestic and foreign monetary conditions shocks. 10 Estimated impulse responses indicate that introducing a minimum wage has the potential to distort the dynamic responses of the output and labor markets to shocks. Relative to alternative adjustment mechanisms, indexation of the minimum wage to aggregate wage inflation least distorts the impulse responses of output and employment, irrespective of the source of business cycle fluctuations, for similar reasons to those given above. Under alternative adjustment mechanisms, the peak responses of output and employment to domestic and foreign supply and monetary conditions shocks are generally amplified. Nevertheless, the peak responses of output and employment to domestic and foreign demand shocks are essentially invariant to the introduction of a minimum wage. In response to a domestic supply shock, in the form of an increase in labor productivity in Hong Kong SAR, output rises and employment falls. Unless indexed to aggregate wage inflation, a minimum wage distorts the responses of the output and labor markets. continues Estimated unconditional standard deviations indicate that introducing a minimum wage in Hong Kong SAR which binds for 20 percent of households will amplify the volatility of output over the business cycle by 0.2 percent to 9.2 percent, and of employment by −1.2 percent to 7.8 percent. These wide ranges reveal the sensitivity of the effects of introducing a minimum wage to the mechanism for adjusting it over time. Introducing a minimum wage without indexing it is estimated to inflate the business cycle volatility of output by 9.2 percent at the 20 percent coverage level, and of employment by 6.6 percent. Nevertheless, introducing a minimum wage indexed to aggregate wage inflation is estimated to amplify the volatility of output over the business cycle by only 0.2 percent at this coverage level, and of employment by only 0.2 percent. Introducing a minimum wage indexed to other variables is estimated to inflate business cycle volatility to intermediate degrees. Indexation of the minimum wage to aggregate wage inflation restores output and labor market efficiency more rapidly in response to shocks than alternative adjustment mechanisms. In response to a shock which affects external price competitiveness, restoring labor market efficiency requires realigning the marginal rates of substitution of households between leisure and consumption with their after tax real wages. A subset of the skilled households are able to adjust their wages optimally in a given period (doing so to equate the expected present value of their marginal rates of substitution between leisure and consumption with the expected present value of their after tax real wages). This implies that the wages received by skilled households adjust relatively quickly to restore their labor market efficiency conditions. Since, in this one sector model, the marginal rates of substitution between leisure and consumption are highly positively correlated across skilled and unskilled households, if the minimum wage received by unskilled households is fully indexed to past aggregate wage inflation, then it also adjusts relatively quickly to restore their labor market efficiency conditions. Hong Kong’s economy is key to the global economy – volatility deters investment and tradeKaraian 14 [(Jason, Senior Europe Correspondent for Quartz, based in London. He previously spent 10 years at The Economist Group; and Heather Timmons, Asia Correspondent for Quartz, based in Hong Kong) “Why Hong Kong’s protests matter to the global economy” Quartz, Sep 29] AT Rating agencies Fitch and Standard & Poor’s say the protests will have no short-term impact on the city’s credit rating, but any extended slowdown of Hong Kong’s regular commercial activities could have long-lasting ripple effects on everything from global banking to insurance, shipping, and China’s currency. That’s because Hong Kong remains a global powerhouse for trade, finance, and insurance, thanks largely to its position as a gateway to mainland China. The value of goods traded via the island city totaled $977 billion last year—5.2% of the world’s overall $18.8 trillion in trade. Hong Kong consistently ranks as the world’s third-most important financial center, behind London and New York. It has steadily closed the gap with its Western counterparts in recent years, as measured by assessments of the ease of doing business, tax laws, its talent pool, according to global financiers (pdf): Hong Kong is the main gateway for foreign direct investment in China. Mainland China attracted $124 billion in global investment (pdf) last year, and, based on previous years, about half of that amount is likely to have flowed through Hong Kong. Hong Kong is home to more than 3,700 regional offices for overseas companies, and more than 80% are responsible for those companies’ business in China, thanks to Hong Kong’s robust rule of law, according to the American Bar Association. About 60% of China’s outbound investment is channeled through or directed to Hong Kong, the Hong Kong government estimates. Hong Kong’s gateway role is reflected in the massive size of its banking industry, with assets worth around eight times the city’s GDP. Some 40% of Hong Kong banks’ HK$9 trillion ($1.15 trillion) in foreign claims are now extended to borrowers in mainland China, up from only 5% a decade ago: The city is also an important source of fee-generating business for investment banks, accounting for $502 million in fees in the first half of this year, according to Thomson Reuters. That was around twice the amount that i-banks made in places like Singapore, South Korea, and Malaysia over the same period. Earlier this month the city’s bankers broke new ground by ushering in the market’s debut Islamic bond, worth $1 billion. The issue vaulted Hong Kong to fifth place in the year-to-date rankings of Islamic banking centers, a fast-growing space. The city is also the world’s fifth-largest foreign exchange trading center, and the largest center for renminbi trading. Trades with the Chinese yuan made up $49.5 billion of Hong Kong’s $275 billion in average daily FX turnover in April of last year: Hong Kong accounts for 72% of all offshore renminbi-denominated currency payments (paywall), according to data from Swift, a global payments system. Alibaba’s blockbuster IPO in New York this month led to some soul searching in Hong Kong, which the Chinese e-commerce giant spurned because it didn’t like its rules on shareholder voting rights. Still, Hong Kong remains a popular venue for initial public offerings, the second-largest in the world in terms of capital raised over the past decade, fueled by mainland firms raising money in the city: But volatility is anathema to IPOs, and Hong Kong’s stock market will probably be beset by it for the foreseeable future. A gauge of volatility jumped by more than 20% in trading today, and this cloud hanging over the market might scare away companies looking to list. Only the plan is resilient to tightening monetary policyPorter 8 [(Nathan, desk economist covering China at the International Monetary Fund, was the Fund's main economist analyzing Hong Kong SAR's economy, Senior Economist at the Australian Treasury) “The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR” IMF working paper 08/285] AT Under its Linked Exchange Rate System, deviations from uncovered interest parity which exert nominal depreciation pressure in Hong Kong SAR necessitate offsetting monetary tightening to stabilize the nominal exchange rate. In response to this tightening of monetary conditions, prices and wages both decline, while excess capacity in the output and labor markets arises. Unless indexed to aggregate wage inflation or unit labor cost growth, a minimum wage amplifies this underutilization of resources.2 In response to a tightening of monetary conditions in the United States, prices and wages both decline, while excess capacity in the output and labor markets arises. These responses reflect the corresponding tightening of monetary conditions in Hong Kong SAR under its Linked Exchange Rate System. Unless indexed to aggregate wage inflation, a minimum wage amplifies this underutilization of resources, although differences in the adjustment under the various indexation schemes are small. Prefer this evidence – large data set of 31 variables and 25 years as well as a comparison against the US as a baselinePorter 8 [(Nathan, desk economist covering China at the International Monetary Fund, was the Fund's main economist analyzing Hong Kong SAR's economy, Senior Economist at the Australian Treasury) “The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR” IMF working paper 08/285] AT The data set consists of quarterly seasonally adjusted observations on thirty one macroeconomic variables for Hong Kong SAR and the United States over the period 1983Q4 through 2008Q2. All aggregate prices and quantities are expenditure based. The nominal interest rate is measured by the three month money market rate expressed as a period average, while the nominal exchange rate is quoted as an end of period value. Data for Hong Kong was obtained from the CEIC database maintained by Internet Securities Incorporated, while data for the United States was extracted from the FRED database maintained by the Federal Reserve Bank of Saint Louis. A2 No indexationNo indexation means wages can’t adjust to shocksPorter 8 [(Nathan, desk economist covering China at the International Monetary Fund, was the Fund's main economist analyzing Hong Kong SAR's economy, Senior Economist at the Australian Treasury) “The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR” IMF working paper 08/285] AT For a small open economy with a fixed exchange rate regime, no indexation or indexation of the minimum wage to consumption price inflation amplifies distortions in the output and labor markets. Without indexation (or some other adjustment) there is no way for real wages to adjust after a shock. Depending on the shock, indexation to consumption price inflation can lead real wages to adjust in the wrong direction—in response to a terms of trade shock which affects the price of imports, real wages must adjust in the opposite direction to maintain the external price competitiveness of the labor market. Indexation of the minimum wage to consumption price inflation impedes this adjustment, as the price of consumption moves in tandem with the price of imports. No indexation empirically means shocks are more damaging and cause a decrease in employment and productivityPorter 8 [(Nathan, desk economist covering China at the International Monetary Fund, was the Fund's main economist analyzing Hong Kong SAR's economy, Senior Economist at the Australian Treasury) “The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR” IMF working paper 08/285] AT In response to a foreign supply shock, in the form of an increase in labor productivity in the United States, prices and wages both decline to restore the external price competitiveness of the output and labor markets. During this period of adjustment, excess capacity in the output and labor markets arises. In this case, the type of indexation does not matter, but a minimum wage which is not indexed significantly amplifies this underutilization of resources. A domestic demand shock, in the form of an increase in government expenditures in Hong Kong SAR, generates capacity pressures in the output and labor markets. A minimum wage does not exacerbate these capacity pressures, but does distort the subsequent adjustments of the output and labor markets. A foreign demand shock, in the form of an increase in government expenditures in the United States, generates capacity pressures in the output and labor markets. A minimum wage does not exacerbate these capacity pressures, but does cause excessive subsequent downwards adjustments of output and employment unless indexed, although the form of indexation does not matter. A2 Index to ConsumptionIndexation to consumption/consumer prices/commodity prices adjusts prices the wrong wayPorter 8 [(Nathan, desk economist covering China at the International Monetary Fund, was the Fund's main economist analyzing Hong Kong SAR's economy, Senior Economist at the Australian Treasury) “The Impact of Introducing a Minimum Wage on Business Cycle Volatility: A Structural Analysis for Hong Kong SAR” IMF working paper 08/285] AT For a small open economy with a fixed exchange rate regime, no indexation or indexation of the minimum wage to consumption price inflation amplifies distortions in the output and labor markets. Without indexation (or some other adjustment) there is no way for real wages to adjust after a shock. Depending on the shock, indexation to consumption price inflation can lead real wages to adjust in the wrong direction—in response to a terms of trade shock which affects the price of imports, real wages must adjust in the opposite direction to maintain the external price competitiveness of the labor market. Indexation of the minimum wage to consumption price inflation impedes this adjustment, as the price of consumption moves in tandem with the price of imports. Directory: file -> view view -> Western Europe after wwii view -> Author study: paul fleischman view -> Qpa1 7ela study Guide view -> Arctic Oil/Gas Neg view -> November 1970 Approximately 150,000-500,000 deaths Bhola Cyclone Bangladesh view -> Grade Level: 6 Unit of Study: Caribbean glce view -> Citation: Duffield, Katy view -> Table of Contents Lesson # view -> Chinese Wind Energy Disad Download 1.87 Mb. Share with your friends:
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