Question

Article 2 Improper to raise minimum wage in battered economy, Hong Kong business leader says, warning more unpaid leave could follow move (SCMP, 27 Sep 2020)2 Raising the minimum wage would be inappropriate in a struggling economy, a Hong Kong business leader said on Sunday, despite other places increasing what the lowest paid make per hour. Federation of Hong Kong Industries honorary president Jimmy Kwok Chun-wah defended the sector’s suggestion the benchmark remain at HK$37.50 (US$4.80), and warned more workers could be forced to take unpaid leave, especially now that the government had decided not to extend the wage subsidy scheme. In contrast to Hong Kong, the hourly minimum wage in New York is US$15, and in Britain, the national minimum wage for adults over the age of 21 has been £6.50 (HK$64) an hour since 2014. While commission members from the labour sector called for an increment to at least HK$39, business sector representatives insisted it stay at HK$37.50 or be raised to just HK$38, saying the coronavirus outbreak had battered the economy.

Article 3 Carrie Lam has said Hong Kong will consider a return to rent controls. But what are they? (SCMP, 17 Jan 2020)3 Tenancy control regulations that have been put aside for 16 years in Hong Kong will be reconsidered, city leader Carrie Lam Cheng Yuet-ngor said as she announced a raft of relief measures on Tuesday. Rather than regulating all flats, the government's focus this time will be on subdivided units - the so-called shoebox flats often regarded as the last housing resort for the needy…….. Tenancy controls have been implemented a few times in Hong Kong - from 1921 to 1926, and from 1973 to 2004 - as a short-term measure to counter unusually high rent increases during housing shortages. But research carried out in 2014 by the administration of Leung Chun-ying concluded that imposing tenancy controls again would trigger a lot of controversies. Economically, any rent control measures would only lead to landlords asking for higher starting rents and becoming more selective over tenants, it found. And politically, there is a 50-50 split between tenants and owners in Hong Kong, making it very hard to reach a consensus on the legislation. Countries such as Spain and the Netherlands, as well as four states in the US - California, New York, New Jersey and Maryland -have introduced rent controls. The newest such controls came in Berlin, Germany, passed into law last October. Under the law, landlords cannot charge rent higher than what the previous tenant paid, and tenants can sue landlords if their rent exceeds ceilings set by the government. In the Netherlands, the law strictly prohibits landlords from overcharging tenants for water and power. Electricity and water bills must be separated from rent, and landlords are not allowed to charge tenants more than 20 per cent above the original price for furniture and home appliances.

Question 2: With reference to Article 2 and 3, with the aid of diagram(s), compare and contrast the welfare effects of the following government policies: minimum wages and rent controls.

Answer 1

Explanation:-

Minimum wages are additionally generally utilized as a methods for increasing living expectations in low pay nations. The level at which they are set is frequently fervently challenged and worries for the work sway considered. Notwithstanding the homegrown discussions, the lowest pay permitted by law setting in low-wage nations has become interna tionalized with people and governments in rich countries requesting higher wages be paid in agricultural nations as a methods for restricting the misuse of work by global enterprises and improving the seriousness of their own assembling areas. Low pay nations are being forced through worldwide exchange associations to expand their base wages or face international restrictions.It is hence amazing that there are a couple of papers on the effect of least compensation on work in deve loping nations. Work economic situations in these nations vary uniquely from those in industrialized nations – most clearly in wording of the presence of a huge casual, revealed area. This makes the dependence on results from industrialized countries unsuitable.

On the off chance that laborers get a boost in salary, at that point there will be an ascent in buyer spending. Low-pay laborers are probably going to have a higher peripheral penchant to devour (at the end of the day they spend high % of additional compensation). This could likewise cause a multiplier impact, with higher spending making thump on impacts somewhere else in the economy; this should help support monetary development.

Notwithstanding, on the off chance that we accept work markets are serious and in the event that we expect that a lowest pay permitted by law causes lower business, at that point rising joblessness will negatively affect total interest. Individuals who become jobless would spend less, prompting lower total interest.

On the off chance that work markets are completely serious and if there is a public the lowest pay permitted by law (NMW) over the harmony wage, you would anticipate a fall sought after for work (, and subsequently, there would be an overabundance flexibly of work . This is known as genuine compensation joblessness) However, to muddle matters work markets are regularly not totally serious, yet display indications of monopsony power (where firms have market power in setting compensation) If firms have monopsony power, they pay compensation underneath the harmony thus min compensation don't cause joblessness.