Meet the culprit of last year's inflation hike

These accounted for over 70% of inflation rate.

According to a government release, the statutory minimum wage was not the major cause of the inflation hike last year.

Secretary for Labour & Welfare Matthew Cheung told legislators today food prices and private housing rents together accounted for more than 70% of the 5.3% year-on-year inflation rate for 2011.

As employment earnings improved amidst a robust economy, the purchasing power of people at large grew stronger and enterprises were more likely to pass on the additional labour costs caused by the statutory minimum wage to consumers, he said. This might to some extent slightly push up the inflation rate.

Mr Cheung said the implementation of the statutory minimum wage resulted in some upward pressure on the prices of products and services in sectors where staff costs constituted a larger proportion of the total operating costs, especially in security services and cleaning services.

"For consumption goods and services with larger shares of staff costs in total operating expenses such as management fees and other housing charges, the inflation rate for the year 2011 as a whole reached 4.1%, significantly higher than the corresponding inflation rates ranging from -0.2% to 1.4% in the previous five years."

He said sectors hiring more low-paid employees will be more susceptible to the impact of the statutory minimum wage, especially labour-intensive sectors like restaurants, retail, estate management, security and cleaning services, and elderly homes.

He added that apart from the statutory minimum wage, other factors leading to the increase in labour costs included the improved experience and skills of employees in the sectors, and more hiring due to the business expansion of enterprises.

"Owing to the robust economy last year, the restaurant and retail sectors in particular recorded notable growth in business receipts throughout the year at 6.4% and 24.9%. This in turn helped relieve the cost pressure on these sectors brought by the statutory minimum wage."

Mr Cheung said the seasonally adjusted unemployment rate fell from 3.5% in the first quarter of last year, before the implementation of the statutory minimum wage, to 3.4% in August to October this year. The unemployment rate also hovered at the lower levels of 3.2% to 3.6% during this period.