TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 49

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are bringing about certain behavioural changes in the

community which, in due course, will operate against the

free play of market forces. In particular, it is argued

that Hong Kong's rising standard of living will lead to

militancy in the labour market which will push up the rate

of increase of money wage rates; as a result, unemployment and internally generated inflation will emerge, the rate

of growth of the economy will decline, the balance of

payments will move into fundamental disequilibrium and the Government will be put into the impossible position of being expected to intervene to raise aggregate demand in circumstances where, if intervention were contemplated,

just the reverse would be necessary.

29.

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It should be borne in mind that twenty years ago

money wage rates in Hong Kong were among the lowest in

Asia; now they are among the highest. But this does not

mean that unit labour costs have risen rapidly; nor does

it mean that there has been a militant labour force.

Instead, the increase in money wage rates reflects the fact

that there has been a remarkable increase in productivity;

and it is this rise in output per capita that explains

why real income per capita has risen so rapidly in Hong

Kong. Because the work force has been able to reap fully

the benefit of its own determined efforts there is, in

Hong Kong, no history of employer-employee confrontation

and consequently there is no latent hostility and lack

of trust in the labour market to come to the surface

as the community becomes more affluent. At the same time,

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