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There is the additional reason that the fall in the value of the dollar has made the remittance of sterling to England for the maintenance of families and of children at school. much more expensive.
7. After the 1919 Salaries Commission all sterling salaries were fixed at a 2/- dollar for the conversion of sterling into dollars, but this simple arrangement proved untenable in 1920, in comparison with the previous Exchange Compensation Scheme of 80% at 1/97.. and 20% at the average current rate of exchange, owing to the rapid fall in the value of the dollar which took place shortly after the revised salaries came into force. A sliding scale therefore was introduced under which an officer was paid at the rate of $10 to the £1 when the dollar was at, or over, 4/4/.; and at $12 to the £1 when the dollar was at 2/6d. or under. There were other rates at intermediate values of the dollar, but these need not be considered as the dollar is now at a little under 2/- and there is some probability that it will remain in the region of 2/-; though it would be a rash man who would stake his reputation on an unqualified opinion as to the exchange value of the dollar in any circumstances.
8. Since the sliding scale was brought into operation, the cost of local living has continued to increase and the burden of officers who have to remit money home for the support of their families and dependents, and for the education of their children. has become heavier. In July, 1928, the Government recognised these facts, and made a fur- ther allowance to officers of 2 per cent of the dollar equivalent of their sterling salaries if they are married, and of 1 per cent if unmarried for every penny that the value of the dollar is below 2/6d. up to a maximum of 18% or 9%, as the case may be.
9. Taking the dollar at 2/-, these two concessions mean that married and un- married officers paid on a sterling basis receive an additional 34.4% and 27.2%, respec- tively, on their nominal sterling salaries, and as an example as to how these percentages are calculated we set out below the sterling and dollar equivalents which married and un- married officers receive when their nominal salary is £1,000 per annum,
Married. Salary £1,000.
$12 to the £ = Plus 12%
TOTAL
$1,120 at 2/-
=
£112, or £1,344 per annum i.e.
£1,000 plus 34.4%.
Unmarried. Salary £1,000.
$12 to the £ Plus 6%
TOTAL
$1,060 at 2/-
=
___
£106, or £1,272 per annum i.e. £1,000 plus 27.2%.
$1,000 monthly
120
73
$1,120
$1,000 monthly
60
17
$1,060
We would draw particular attention to the difference between the nominal sterling salary and the salary which is actually drawn by an officer when at his post, and in this connection it seems obvious to us that the basis which allows such a large disparity be- tween the nominal sterling salary and the amount of the salary actually paid requires modification.
10. It is difficult to name a figure which shall represent the increase in the cost of living during the last 8 years. Estimates by persons who have given evidence before us or sent in written statements, varied very greatly, and it is interesting to remark that our failure repeats the experience of the Ceylon Salaries Commissioners who in their Re-
port (1921) stated that "owing to the complexity of the factors involved and the lack of sufficiently comparable data it was beyond our power to arrive at a mathematically accurate index figure of increase". It is also difficult to differentiate between the pro- portion of that increase which may be regarded as permanent and that which is due to temporary causes.
11. But, after the most careful consideration that we can give to the subject, we think that the percentage increases already granted fairly represent the total additional expense which Government should be called upon to meet, if fair treatment is to be shown to officers on a sterling basis; and that a 15 per cent addition to the existing nominal sterling salaries may properly be regarded as representing a permanent increase in the cost of living in the Colony.
12. We recommend that the present system of allowing $12 to the pound, plus a varying percentage for the conversion of sterling into dollars, be abandoned and that in its place the following be substituted :—
All sterling salaries of employees of the Government should be increased by 15%, subject to the conditions laid down in paragraph 13, infra, and should be paid to them when on duty in Hong Kong on the last day of each month in dollars, Hong Kong Currency, at the average opening published demand rate of exchange on London of the Hongkong and Shanghai Banking Corporation, from the 15th of the preceding month to the 5th of the month for which payment is to be made, provided that such average demand rate of ex- change on London for the month is 2/-, or less than 2, but if the average demand rate of exchange be more than 2/- the salaries shall be paid in dollars Hong Kong Currency at exchange 2/--
In addition to the above, we recommend that the Government, at its discretion. continue to pay a High Cost of Living Allowance to officers but not exceeding :—
15% of the nominal sterling salary of married officers and 74% of the nominal
sterling salary of unmarried officers.
Taking exchange at 2/-, for example, and applying the rule strictly, a married officer at present receiving a nominal salary of £1,000 per annum and actually $1,120 per mensem will receive £1,150 per annum plus a high cost of living allowance of 15% £1,322.10.0d. per aunum or approximately $1,102.10 per mensem.
=
Similarly, an unmarried officer at present receiving a nominal salary of £1,000 per annum and actually $1,060 per mensem will receive £1.150 per annum plus 74% £1,286.5.0d. per annum or approximately $1,030.20 per mensem.
This would mean that the amount of the dollar salaries drawn in Hong Kong would be slightly reduced, but the leave and pensionable pay would he increased by 15% for both married and unmarried officers.
13. In fixing salaries on a sterling basis we have given effect generally to the con- siderations dealt with in the two last preceding paragraphs; but we have endeavoured to retain to an officer the number of dollars he is at present drawing, and this has made it necessary to depart frequently from the literal application of the rule laid down in para- graph 12 of this Report.
14. Other considerations obviously apply in the case of officers on dollar salaries. Here, as with sterling salaries, we have been faced with the difficulty of arriving at a fig- ure which would accurately represent the increase in the cost of living. A very large proportion of the witnesses have enlarged on this increase as a fact and have proved to us the difficulty they have in balancing their domestic budgets. We have given our most careful consideration to the question as a whole and we have come to the conclusion that a 20% increase on dollar salaries would be fair to this class of officer. We have kept this percentage in mind in making our recommendations but have not adhered to it literally in every case.
15. A matter emphasised by many witnesses was the difficulty, if not impossibility, that many married officers have in maintaining themselves, their families and dependents on existing scales of pay. We assume that Government is willing to give serious considera- tion to such representations but we think that it should be laid down as axiomatic that Government is not called upon, as from the first entry of any person into its service, to provide a salary which is sufficient, not only to keep himself in reasonable comfort, but also to maintain a wife and children, and possibly even parents.
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