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FAR EASTERN ECONOMIC REVIEW
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exports to push ahead without a large increase in the labour force. the last resort, workers can only be drawn into the r
jobs and encouraged to produce more if they are offered decent incentives through higher wages.
But spokesmen for industry have voiced their fears that the latest demands for more pay could price Hongkong products out of world markets. What they never admit is that the labour shortage and the higher, wages which ac- company rising demand for workers are a direct result of 90% of Hong. higher exports (which absorb some 80% to kong's total industrial, output). Employers also forget that workers refrained from pushing wage demands very strongly after the outbreak of communist violence in 1967 because most of them were afraid of being branded as "leftist trouble-makers". Up till now, it has been virtually im- possible to find out what developments on the wage front really mean because employers, workers and the Government. have all failed to investigate the way in which wages are linked to the overall performance of the economy.
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The best measure of how wages are moving is the index of average daily wages for industrial workers (based on samples taken from firms in 10 manufacturing industries, dockyard, electricity, trams and communications). The index shows a 9.7% increase in wages including fringe benefits in the year ending March 1969 This compares with a 5.6% rise in the previous year and a similar 9.7% climb in 1966-67. Between September 1968 and March 1969, wages started to rise more rapidly by 7.4% indicating that pay scales were pegged during the spring and summer of last year in the aftermath of the 1967 troubles. In fact, wages rose faster for September to March than in any other half-year since the six-monthly assessments were started by the Labour Department in 1965.
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Can Hongkong afford to pay higher wages at this rate? Are increased earnings running ahead of productivity? These are some of the crucial questions which the official statisticians have so far neglected to examine. It is often claimed that rising wages in Hongkong are directly related to the higher export earnings which manufacturers, enjoy with the continued expansion of Hongkong's sales overseas. The theory is that the local factory gets new and bigger contracts. In order to attract more workers and increase the output of the existing labour force, employers are forced to raise 'pay scales. In industries not directly geared to exporting (i.e. services) and in export industries which are growing at a more sedate pace than the overall average, employers have to put up' wages even at the expense of their own profits to avoid losing workers.
Not all the evidence supports this argument. The recent growth in exports has been very impressive. Percentage in- crease in the total value of exports in the last three years (using 1965/66 as a base year) were up 15.7% in 1966/67; then up 34.8% compared with the base year level in 1967/68 and 74% above in 1968/69 (up to March 31). In contrast, the increase in wages has been distinctly sluggish. The index of wage rates (using the same base) shows that pay packets moved up by only 9% (1966/67) to 15% (1967/68) and then 24% (1968/69) above the 1965/66 level.
Another blow to 'the "export theory" of wages is pro- vided by the statistics on earnings in individual sectors of the economy. In relation 'to actual industries, the highest paid workers are those engaged in utilities, communications, tramways and electricity supply, followed by dockyard workers and' motor repairmen. Below these, rubber footwear spotimianą ni bait qlovalo avui eman zigg/w il-
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JUNE 26, 1969
offers the top wage rates amongst industries directly engaged in exports, followed by enamelware, garments and shirts, cotton spinning, knitting, cotton weaving, plastics and, sub- stantially lower paid than the rest, workers manufacturing metal torch cases. (This classification of industrial jobs, based on surveys undertaken by the Labour Department since 1958, does not include several major export-earners, for example electronics and wigs, which have developed more recently and are now industries with a higher growth record paying comparable wages.) Overall the tendency has been for wage differences between industries to level out, though utilities and dockyards have continued to pay higher rates than manufacturing and textiles.
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The picture begins to take on a rather different pattern (when the productivity of export industries is investigated on an' individual basis. A detailed breakdown shows that two factors are at work in pushing up workers' wages. The first is the overall improvement from year to year in the value of sales overseas, while the second is the rise in the industry's volume of production. This pattern emerges from a com- parison admittedly crude of the wage rate index 'with an index of the volume of exports (weighted by 1965/66 values)..
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In textiles, the export quantity index for the four leading sales categories within the industry (clothing, textile yarn, cotton fabrics and made-up articles of textile material) shows that with 1965/66 at 100, the index rose to 107 in 1966/67; 108 in 1967/68; and 116 during 1968/69. In contrast, the wage index for the industry, as a whole has "risen from 100 for 1965/66 to 108 for 1966/67; 114 in "1967/68; and 121 during 1968/69. This rough statistical exercise suggests that in this crucial export industry, wages are running slightly ahead of physical productivity. 584 A breakdown within the complex textile industry shows
that while wages are now fairly uniform, two sectors knitting and garments have enjoyed the highest wage growth in recent years. While the wage rate index, published by the 'Labour Department with March 1958 at 100, ad- vanced from 177 in 1965 to 222 in March 1969 for the industry as a whole, wages for knitting workers moved
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In textiles, wages are running slightly ahead of productivity but the pattern for industry as a whole shows high gains in output are not being matched by comparable wage rises.
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