HK Case final

HK Case final - Case Assignment Big City, Small Pay:...

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Case Assignment Big City, Small Pay: Minimum Wage for Hong Kong? 1. Date of Submission: September 10, 2008
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2. Please use a supply-and-demand graph to illustrate the effect of the minimum wage legislation on Hong Kong? A key point to note is that minimum wage legislation is of little concern for employees who are already earning wages significantly above the minimum wage level. As such, the market in consideration here is the labor market for low skilled, hence low-paid, workers. Assuming that the supply and demand labor curves remain unchanged as a result of the minimum wage legislation, wages will increase from the equilibrium level of W 0 to W . At W 1 , the quantity of labor supply (L 1 ) exceeds the quantity of labor demanded (L 2 ), resulting in a surplus of (L 1 -L 2 ) – these people want to work but cannot find jobs! Comparing to the previous situation of equilibrium, employment has been reduced from L 0 to L 2 . 3. Which groups of people are likely to benefit from the minimum wage legislation? i. Low-skilled workers who are able to gain employment or retain their jobs will benefit because they will be paid the minimum wage which is higher than their previous wage. ii. Companies that produce necessities can also potentially benefit. When the minimum wage is established, low-income workers will tend to spend this increased in income on immediate consumption of basic living goods, leading to sales growth for these companies.
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This note was uploaded on 09/11/2009 for the course GSB #13821 taught by Professor Orin during the Spring '09 term at Panola.

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HK Case final - Case Assignment Big City, Small Pay:...

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