Labour market policies in a changing political economy

In recent years, the government has improved on its provisions for severance pay and the long service payment, mandated more holidays for workers, and mandated industrial safety rules, in addition to introducing other pro-labour policies. These policies reflect, in part, a natural desire to share the benefits of Hong Kong’s increasing wealth among more people and, in part, a shift in the political environment with the emergence of more powerful pro-labour pressure groups and of political parties seeking broad community support. But it is important to recognize that however well intentioned, government intervention is costly, and is not justified unless the cost of the identified market failure is greater than the cost of the intervention. How shall we evaluate the large variety of current and proposed labour-market policies? The next section presents a general framework for analyzing labour-market policies. Some guiding principles emerge from the discussion. The chapter then takes up six specific, topical problems as illustrative cases for discussion: labour importation; training; wage subsides for disadvantaged workers; unemployment protection; minimum wages legislation; and labour relations.