33
wages and salaries are being similarly adjusted (having regard to profitability and the state of the labour market) and that the cost of such awards is acceptable on budgetary grounds.
93. The Economic Background publication shows that in the year ending September 1973, wage rates, in manufacturing at least, increased by about 11%, whereas consumer prices in the same period increased by about 15%. In fact, wage rates increased only marginally faster in this period than in the previous twelve month period, and at a substantially slower rate than in 1971 and 1970.
This reflects the rather slack demand for labour at the present time. Although the Government does not have to operate within the disciplines of the market forces operating in the private sector, it would clearly be irresponsible for the Government to ignore the economic realities of the present situation in the labour market and for its pay policy to lead the private sector and, thereby erode the economy's external competitiveness.
94. I am aware that, at the present time, firms' internally generated funds are growing rather more rapidly than wages (again, as indicated in the Economic Background publication).
But this means that additional funds are available for fixed capital investment and such investment is taking place on a substantially increased scale. As a result, productivity has been increasing. At the same time, manufacturers
have been seeking out cheaper sources of raw materials (as evidenced by the substantial switching that took place last year from one source to another). Thus, the Hong Kong economy will be ready to take full advantage of a renewed
growth of world demand. Then wages will not only increase again at a faster rate than at present but also, as was the case until recently, at a faster rate than firms' internally generated funds. I should make another point: bearing in
mind that manufacturers appear determined to increase productivity and contain the upward movement of unit costs
and the fact that the labour market is currently rather slack,
the Government could, by leading in its pay awards, bring about
an increase in unemployment. At the present time, manufacturing employment is at least holding steady and we must keep it
that way.
/(D).....
No comments yet.
Private notes are available after approval.