The city is engulfed in a divisive debate as it prepares to set its first-ever minimum wage

Lawmakers passed the minimum-wage bill after a 41-hour session in July in response to growing public calls to tackle the widening wealth gap. Some of Hong Kong's lowest-paid workers, such as toilet cleaners or security guards, earn as little as HK$20, or about US$2.60, an hour.

Hong Kong Chief Executive Donald Tsang, in a luncheon address to business groups last week, said the government was forced to legislate a minimum wage after a 'tepid' response from the business community to a voluntary plan for a minimum wage proposed in 2006.

'[T]ensions are developing in society because the fruits of the economic recovery have not trickled down to all levels of the community,' said Mr. Tsang. 'Some people feel that they are being ripped off.'

A Provisional Minimum Wage Committee appointed by the government has yet to recommend the hourly rate, but HK$28 per hour, the median between what labor representatives and business groups are calling for, is considered likely. Law firm Mayer Brown JSM said it believes the recommendation could come this month.

Critics of the minimum wage call the legislation an unwanted departure from Hong Kong's laissez-faire roots. They argue that in an economy so dependent on small and midsize enterprises, employers operating on tight profit margins may need to lay off workers. Compliance costs will also pose a major burden, they add.

'Any increased regulation reduces Hong Kong's competitiveness,' said Duncan Abate, a partner at Mayer Brown JSM, who is also an executive council member of the Employers' Federation of Hong Kong. 'Minimum wage is a very intrusive piece of legislation that warps the balance between supply and demand and creates unemployment.'

Simon Wong, president of the Hong Kong Federation of Restaurants and Related Trades, said rising wages weren't as big a concern for the industry as rising commodity prices, but he said the worsening sentiment toward big business in Hong Kong is still a matter that urgently needs to be addressed.

'It is likely that companies will try to adjust and cut costs in other ways first before laying off workers,' he said.