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."

A dispute between labor groups and the business sector last week raised the question of whether a minimum wage might backfire more directly against the workers it is meant to help. Trade unions called for a boycott of one of the city's largest fast-food groups, Café de Coral Holdings Ltd., which operates restaurants in Hong Kong as well as the Manchu Wok chain in North America. Its chairman, Michael Chan, also sits on the Provisional Minimum Wage Committee.

While the minimum-wage law has yet to take effect, Café de Coral last month acted pre-emptively by increasing hourly pay by between HK$2 and HK$3.50. However, because the company also eliminated a paid 45-minute paid daily lunch break, the move turned into a public-relations fiasco when it became clear that employees originally earning $22 an hour would end up taking home less each month if they worked eight hours a day, 26 days a month. The boycott plan soon followed.

Over the weekend, the company bowed to pressure and decided to reinstate the paid 45-minute lunch break.

"We welcome Café de Coral's decision as there will be a significant improvement in workers' livelihoods," said Lee Cheuk-yan, general secretary of the Hong Kong Confederation of Trade Unions, which called off the boycott. "There is a new culture of consumer power in Hong Kong, which is encouraging. This acts as a deterrent to prevent other corporations in Hong Kong from cheating workers in this way."

A Café de Coral spokeswoman said the company decided to reinstate the paid lunch break, despite a "large majority" of employees agreeing to the change, in order to "allay public concerns" and "preserve social harmony." The wage increases, she said, would remain in effect.

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.

Donna Kwok, Greater China economist at HSBC, said it is still "too soon" to tell what the effects of minimum wage are going to be for Hong Kong, but there would likely be an immediate indirect effect in the form of a "positive kick to consumption" as wages increase and worker sentiment improves. Direct effects such as potential job losses would take longer to appear.