Hong Kong Aff

A2 Decrease in working hours

The decrease in average working hours is slight while working hours increase for the most vulnerable

Interestingly, the report showed a slight decrease in the weekly working hours by 0.4 per cent 1 year after the SMW. However, our study reveals a significant increase in the weekly working hours among the vulnerable groups. This finding suggests that the employers of individuals belonging to vulnerable groups tend to adopt a different management strategy in response to the SMW by requiring the employees to work for a longer time. An additional finding from our study is that the social relations domain of QoL decreased dramatically for those who worked for more than 18 hours before the legislation. This group of people remained working for long hours after the legislation (see Figure 4). Further analyses revealed that the decrease in the social rela- tions domain of QoL took place mainly among the newly arrived women and low-income workers, but not among the CSSA recipients who worked for much fewer hours than did the former two groups. The find- ings raise the concern as to whether long working hours make it difficult for people to maintain their relation- ships with family and friends. Interestingly, working hours did not correlate with the physical health and social relations domains of QoL, but correlated positively with the other two domains, which is a departure from previous findings (e.g., Verbakel & DiPrete, 2008). A possible reason is that the longer working hours may contribute to QoL through increasing monthly income. This explanation gains support from the findings based on partial corre- lation analysis which revealed that the correlation between working hours and the two domains of QoL became non-significant when monthly income was con- trolled. To further understand the impact of the SMW on the life of vulnerable groups, future research should examine how working hours and monthly income can affect the interaction and daily living of the families more specifically.

Outweighs

it moves the most vulnerable off the brink so they can buy non-essential goods and contribute more to the economy; working hours decrease for the wealthy doesn’t significantly reduce their spending

The average decrease is small, whereas the increase for the most vulnerable is much larger – slight pay reductions don’t significantly change spending habits and won’t harm the overall economy as much as larger changes, even if they apply to more people

No change in workers’ hours

MWC 14 [JAT Sew Tong et al (Chairperson of the Minimum Wage Commission of Hong Kong), “2014 Report of the Minimum Wage Commission,” Minimum Wage Commission] AZ

There were views that as SMW had pushed up labour costs, enterprises might reduce the working hours of the relevant employees to alleviate such cost pressure. According to the data from AEHS, the year-on-year change in the median weekly working hours of lower-skilled full-time employees in most LPS in May to June 2013 was not notable (Table 4.7). More visible decreases were recorded only in security services (down by 4.5%), food processing and production (down by 4.1%), and laundry and dry cleaning services (down by 3.5%). More recent findings from GHS showed that the average weekly working hours of lower-skilled full-time employees (excluding government employees and live-in domestic workers) in the second quarter of 2014 were 46.5 hours (14), similar to its year-ago level. To this end, the uprating of SMW in 2013 did not bring about significant impact on the working hours of lower-skilled full-time employees. 4.50 The 2013 Study on Knock-on Effect also showed that the contractual monthly working hours of most of the matched target employees in the retail and restaurant sectors remained unchanged in September 2013 over a year earlier. Only 3.1% and 1.8% of the matched target employees in these two sectors respectively had their contractual working hours slashed, suggesting that the revised SMW rate did not substantially affect working hours. Also, the monthly wages of most of these employees either increased or remained unchanged.

A2 Competitiveness

The impact is small at best

Yip 13 [(Paul, professor of social work and social administration at the University of Hong Kong) “In fight against poverty, Hong Kong needs basic respect for workers” south china morning post 09 October, 2013] AT

Certainly, we can understand business concerns that high labour costs would make Hong Kong less competitive. However, that shouldn't stop successful firms contributing 1 or 2 percentage points of their annual profits to employees. This would have a limited impact on shareholders and their own riches. And I'm sure there would be lots of happier faces. Furthermore, the government and non-governmental organisations should provide additional security for the community, especially young people, by creating more long-term, permanent positions. The government's use of subcontractors is one factor creating the working poor in our community. On the surface, officials may save some money, but what about the social costs? Reducing poverty requires a collective community effort. Yes, we need good government policies. But socially responsible companies and a hard-working, intelligent labour force are crucial components as well. We don't have to follow the example of the welfare states of Western Europe. However, the basics of respecting workers, paying them a decent salary and being committed to building a harmonious society should not be any different. We might take a different route, but we should be aiming to achieve the same thing.

Turn – the minimum wage means only the most resilient industries survive, which increases Hong Kong competitiveness

Sharif 11 [(Naubahar Sharif, Division of Social Science, The Hong Kong University of Science and Technology; Can Huang, United Nations University-MERIT and Maastricht University) “Innovation strategy, firm survival and relocation: The case of Hong Kong-owned manufacturing in Guangdong Province, China” Research Policy Jun 18, 2011] AT

The most damaging of these policies for manufacturers—for instance the introduction of a minimum wage—are applicable to the whole of Guangdong Province, en bloc, where the minimum wage has risen by an average of 18.6% since 1 March 2011.7 Another example of a policy applicable to all of Guangdong Province is the imposition of stringent pollution control requirements on manufacturing plants across the entire province. (Given these challenging province-wide business conditions we did not, in our study, investigate the relocation of Hong Kong-owned manufacturing firms between cities within Guangdong. This may be regarded as a methodological limitation of our paper insofar as we do not study or compare microeconomic environments across cities within Guangdong—that would have required a very different data-gathering methodology, applied at the city level. Therefore, within-province variation across cities cannot be addressed in this study.) These challenges have squeezed thousands of firms operating in labor-intensive, highly polluting industries, most of which have been and continue to be run by Hong Kong-based entrepreneurs. The prevailing sentiment, as expressed by leaders of Hong Kong’s manufacturing associations, is that the substantial costs associated with relocation as well as increased operating costs in the new region effectively mean that relocation out of Guangdong is a suboptimal choice. Our survey data confirm the view that rising cost is the primary reason for a firm’s decision not to stay in Guangdong, while attractive conditions in other locations or business expansion are the least important reasons (Fig. 1). Unless Hong Kong-owned manufacturing firms can develop new strategies—and move up the value chain—they will find it difficult to survive in Guangdong, dramatically undermining Hong Kong’s manufacturing-related service-based economy there. Policymakers in Guangdong prefer clean, high value-added industrial activities to these highly polluting and labor-intensive industries. However, any dramatic shake-up in Hong Kong-owned manufacturing activity in Guangdong would have serious repercussions that might be hard to manage. The upshot is that the success or failure of Hong Kong-owned manufacturing firms in Guangdong matters tremendously because their economies are increasingly integrated and their prosperity rests on the health of these firms. Despite an extensive body of literature on economic linkages and cross-border investment between Mainland China and Hong Kong, very few studies—including two undertaken by the Federation of Hong Kong Industries (2003, 2007) and another by Huang and Sharif (2009)—focus on the innovation activities of Hong Kong-owned manufacturing firms in Guangdong. Even fewer studies have linked the innovation patterns of these Guangdongbased, Hong Kong-owned manufacturing firms to survival and relocation decisions. Because these activities have helped to forge strong economic ties between Mainland China and Hong Kong and transform the region into a manufacturing powerhouse in Southern China, this is a noteworthy gap in the literature. This study attempts to fill this gap by conducting an innovation survey, administered from March to September 2008, involving 492 Hong Kong firms with manufacturing operations in Guangdong. The econometric analysis based on the survey data demonstrated that the firms’ innovation activities determine their survival and relocation decisions.

Turn – business taxes for social services non-unique the effect, and wage increases force out less productive firms and spur innovation

Bowring 13 [PHILIP BOWRING, Hong Kong-based journalist and commentator, based in Asia for 39 years writing on regional financial and political issues. “Everyone in Hong Kong deserves a living wage.” South China Morning Post, Sunday, 15 December, 2013, 4:14am] AJ

The irony is that if incomes were better distributed, the pressure on the government to use its huge revenues for social purposes would be less. But the government itself, as the largest employer, has been a major agent in suppressing the wages of the low-skilled. Government reduction of staffing and use of contractors to provide various services took a large number of unskilled workers out of the civil service, where there are formal pay scales and a degree of collective bargaining, into a situation where they had no bargaining power at all. Needless to say, the middle to higher echelons of the civil service were not only exempt from this outsourcing but continued to enjoy higher salaries than most of their peers in the private sector. Meanwhile, at the bottom end of the pay scale, the government's undercutting of wages flowed through the whole private sector. Nor is suppression of wages just seen among the unskilled. The Lamma ferry disaster and the dock crane operators' strike have cast light on how poorly paid are many with exacting jobs and heavy responsibilities. Naturally, small businesses such as restaurants worry that big increases in wages for the likes of cleaners will make their businesses unviable. But, in most cases, rents are a bigger burden than wage increases. And no business should exist if it cannot pay a wage that provides a minimum living standard. Higher wages will kill some businesses but create new demand for others. They will also drive something badly needed in Hong Kong - higher productivity. For sure, there are labour shortages in some sectors which cannot simply be filled by increasing wages. Construction is one, given the heavy manual work involved. But mega projects like the high-speed railway were originally justified by the government for their job-creating impact. So there is scant excuse now for using any shortage as a lever for the broader relaxation of labour import demanded by the developer/contractor interests. The government itself spends a lot on supporting bureaucrats at the Productivity Council but foreigners comment on the poor productivity of Hong Kong's construction sector. Failure to focus on productivity is explained by low wage levels and the fact that corporate profits are more determined by land price inflation than by operating efficiently.

Minimum wage empirically results in increased productivity and competitiveness – wage increases mean only best firms survives

Mayneris et al 14 [Sandra Poncet, Florian Mayneris, Tao Zhang, “The Cleansing Effect of Minimum Wage: Minimum Wage Rules, Firm Dynamics and Aggregate Productivity in China, ” CEPII (Centre d’Etudes Prospectives et d’Informations Internationales), September 2014] AZ

We study how the 2004 reform of minimum wage rules in China has affected the survival, average wage, employment and productivity of local firms. To identify the causal effect of minimum wage growth, we use firm-level data for more than 160,000 manufacturing firms active in 2003 and complement the triple difference estimates with an IV strategy that builds on the institutional features of the 2004 reform. We find that the increase in city-level minimum wages resulted in lower survival probability for firms that were the most exposed to the reform. For surviving firms, wage costs increased without negative repercussions on employment. The main explanation for this finding is that productivity significantly improved, allowing firms to absorb the cost shock without hurting their employment nor their profitability. At the city-level, our results show that higher minimum wages fostered aggregate productivity growth thanks to productivity improvements of incumbent firms and net entry of more productive ones. Hence, in a fast-growing economy like China, there is a cleansing effect of labor market standards. Minimum wage growth allows more productive firms to replace the least productive ones and forces incumbent firms to strengthen their competitiveness, these two mechanisms boosting the aggregate efficiency of the economy.

A2 Perception Link

Investors perceive the plan as stable

Cho 12 [(alex, author of Intertrust report, economic reporting agency) “Budget Bulletin Hong Kong 2011/2012” Intertrust, 2011/12] AT

Economic Outlook From an economic performance perspective, the overall 2010 GDP growth is 6.8% and the Government expects to see solid growth in the economy in 2011. The unemployment rate has fallen to one of all times low. Although the effect of implementation of statutory minimum wage is yet to be seen, it is expected the general strong economic growth should help Hong Kong through this change. The strong growth sustained by the Mainland and Asian economies will continue to benefit Hong Kong, yet the fragile economic recovery in the United States and Europe might still have some potentially negative effect. The Financial Secretary forecasted the 2011 GDP growth will be in the range of 4% to 5%.

A2 MW = Red Tape/Kills Free Markets

The entire 1AC is an impact turn to this – totally unregulated free markets are dangerous and cause instability

Hong Kong’s 2010 minimum wage and several other social policies make this non-unique and prove there’s no impact

Economist 10 [“End of an experiment The introduction of a minimum wage marks the further erosion of Hong Kong’s free-market ways” Jul 15] AT

The minimum wage will also expand the rules involved in doing business in Hong Kong. Especially at the entrepreneurial end of the spectrum, business people long enjoyed a lack of red tape. Until 1999 companies were required to tell the government when an employee arrived or departed, and to provide information on their incomes once a year so that taxes could be calculated. But because income tax was paid only above HK$90,000 and then HK$100,000, perhaps 60% of the population paid nothing. Tiny businesses often did not bother to file and their non-compliance was largely ignored. Even sophisticated multinationals could set up a representative office in hours without concern for continuous paperwork. This changed in 2000 with a compulsory pension scheme, one of many social-policy efforts championed by the last colonial administration. Companies were required to file monthly data to one of a few selected intermediaries and to remit 5% of pay for any employee on more than HK$5,000 a month. The minimum wage will increase the demand for paperwork again, and by a lot. Hours and wages will be filed for all workers, right down to people in the knick-knack shops and markets that have been a vibrant component of Hong Kong's economy. The government will have to spend more money on collecting data and inspecting firms. Rules for all Other labour-market rules have come along. You may say some were overdue: in 1996 discrimination on grounds of sex, disability and family status became explicitly illegal; in 2009 the ordinance was expanded to include race. Professions began imposing local standards. Hong Kong had, for example, been an appealing destination for doctors from around the world. During Cowperthwaite's tenure, more than half of physicians born in Hong Kong had been educated overseas. But in 1997 new licences were restricted to those who were locally certified. Foreign-trained specialists have become increasingly scarce. A provision in the minimum-wage law bans unpaid student internships for all but those attending Hong Kong schools. Product markets have more rules too. Hong Kong's enthusiastic embrace of free trade made its food shops a collection of the world's favourite goodies. But on July 1st a food-labelling law came into effect with the usual laudable motivations—better information and concern about tainted products from China—and the usual unintended consequences. The Hong Kong Food Council, a trade association, released a survey shortly before the law's introduction concluding that 10% of all the prepackaged products sold in the territory would not comply and would have to be withdrawn. A large grocery chain has already pulled more than 1,000 items, including commonly available breakfast cereals, from its shelves. Small shops selling ethnic and health food say the rules may wipe out their entire stocks. In finance also, intervention has been on the rise. The Hong Kong Mortgage Corporation was created just before the handover with the overt aim of encouraging home ownership, rather like Fannie Mae and Freddie Mac, the American behemoths that were at the core of the recent global crisis. Hong Kong banks have conventionally been conservative lenders, extending mortgages that cover less than 70%, and sometimes even less than 50%, of property values. An insurance scheme provided by the Mortgage Corporation enables local banks to advance loans of up to 95% of values. Like Fannie and Freddie it has become a huge force in the wholesale market by buying, packaging and reselling mortgages. It has ventured abroad too: in 2008 it created a joint venture in Malaysia to provide mortgage guarantees; in 2009 it created another in Shenzhen and it bought South Korean mortgage-backed securities. In response to the Asian financial crisis of 1997-98, the government directly intervened in the Hong Kong stockmarket, buying up local shares. Though its stake was largely liquidated by 2002, HK$50 billion-worth was retained by a fund controlled by the central bank. This portfolio has since swollen and contracted more than the local market, suggesting that it is being actively managed. And in 2008, in the midst of the global financial crisis, Hong Kong introduced universal deposit insurance, which it had explicitly rejected in the 1960s. The law is set to expire at the end of the year, but regulators and bankers say unofficially that it would be unthinkable for the territory to allow a bank to collapse. Perhaps the most intriguing change, although little noticed so far, is a new monopoly law, a draft of which was entered into the government records on July 2nd. In principle, such a law should foster competition. In practice, it is likely to extend the purview of the state into private business, not least mergers—while leaving established monopolies, often associated with the government, entrenched. Behind the scenes some of these have been busily seeking exemptions. One such monopoly is the Jockey Club, which owns the gambling franchise. It is simultaneously the largest direct taxpayer, responsible for 7% of total receipts, and through its contributions to schools, hospitals and other charities, drawn from profits, accounts for perhaps another 0.7% of spending on public services. Lots of companies would love to bust this monopoly—for evidence, look at their enthusiastic entry into neighbouring Macau—but because of its philanthropic role the Jockey Club is likely to be protected. Under reconstruction Other monopolists can expect to get similar treatment. In 1986 four stock and derivative exchanges were merged into a regulated monopoly. Shares in the exchange were publicly listed but in 2007 the government disclosed that it had 6% of the openly traded shares, making it the largest owner. Consequently it has a direct financial interest in the exchange's success. Attempts since to set up alternative markets in Hong Kong have been stymied by protective regulations. The government is also increasing its role in transport. State involvement is common in many countries, but in Hong Kong this is at odds with the free-market past. The entrance to the Cross-Harbour Tunnel, which was built in the 1970s under a private tender but reverted to government control in 1999, is permanently gridlocked, partly thanks to tolls that are too low, especially at peak hours. The new airport was structured as an independent entity that could be listed, but any talk of privatisation has disappeared. Two vast new projects, a bridge to Macau and a high-speed railway to Guangzhou, are being handled directly by the government, with no tendering and no discussion of privatisation. Only a few years ago it appeared that the government's steps into the economy would be curtailed by experience. Heavy subsidies to create a Disney amusement park and a place called Cyberport, to encourage the development of internet-related companies, both drew strong criticism. The park has not been a success and Cyberport is best known as an investment coup for the tycoon who was able to obtain cheap land under an industrial scheme that could be resold as luxury flats. But similar schemes abound. Disney recently received more land. New areas are being reserved for “science parks” and, turning the infant-industry argument upside down, money is being allocated to rejuvenate Hong Kong's faded film industry. These are not disconnected episodes. Underlying them is a shift in officialdom's view of the economy. In 2008 Mr Tsang announced that he had succeeded in having Hong Kong included within China's five-year plans. Last year he said that in light of the global financial crisis, “we have to revisit the government's role in promoting economic development” and special efforts would be made to encourage the growth of six industries. Hong Kong, in other words, now has an industrial policy. Milton's paradise lost Cowperthwaite gave two plausible reasons for such efforts. First, a country might need to develop natural resources. But that did not apply to Hong Kong. Second, countries might be less interested in maximising wealth than distributing it. He also thought that a false step. Mr Tsang and his colleagues are all for wealth maximisation too, but it may be that Hong Kong, no longer being a poor outpost, has lost the stomach to work like one. The huge growth in government spending during the last colonial administration was required, according to Lord Patten, the final governor, because “Hong Kong's economic vitality and strength were not matched by adequate social-welfare.” Many recent shifts in the law have elements of social policy, and many of the most vocal advocates of the shift reflect the opening of the political system, creating pressure for real problems to be addressed. Hong Kong remains, by and large, a vibrant, entrepreneurial place, with government spending far below Western standards. The costs of rising intervention will take a while to appear—and may always be hard to measure, especially with mainland China growing so fast. Yet a remarkable economic experiment is at an end.

A2 Guangdong Proves

Multiple alt causes to Guangdong

Sharif 11 [(Naubahar Sharif, Division of Social Science, The Hong Kong University of Science and Technology; Can Huang, United Nations University-MERIT and Maastricht University) “Innovation strategy, firm survival and relocation: The case of Hong Kong-owned manufacturing in Guangdong Province, China” Research Policy Jun 18, 2011] AT

The Guangdong manufacturing environment has, however, been changing dramatically of late. Since mid-2007, Hong Kong manufacturers (as well as other manufacturers operating in Guangdong) have found themselves increasingly forced either to shut downor tomove theirmanufacturing operations out of Guangdong. This shakeup in industrial activity has been caused by the combined effects of unfavorable central government policies that have penalized low-end and low-cost manufacturing, a regulation requiring exporters to pay a deposit equivalent to half the amount spent on importing almost two thousand raw materials; 4 cancellation or reduction of tax refunds on goods such as metals, plastics, textiles, and furniture;5 a stronger Yuan; escalating prices for energy and raw materials; stringent pollution control requirements in Guangdong; the introduction of welfare benefits for employees; and the introduction of a labor law stipulating the benefits and responsibilities of both employers and employees, insurance coverage, and overtime pay.6

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