TNAG-0647-FCO40-795-Study-of-labour-relations-in-Hong-Kong-by-Professor-H-A-Turn-1977 — Page 137

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How are wages determined in Hong Kong?

Obviously not just by the operation of the laws of supply and

demand, as we have often been told. Labour economists can breathe

again the perfectly free labour market does not exist, even in

HK.

Fragments of answers to the question have been suggested in

earlier sections and throughout our notes. Wages are determined

by a combination of (a) short-term cyclical market demand in

sectors such as manufacturing for export, construction, etc, and

(b) a system of self-regulation by employers which is most consis-

tent and effective in the large-scale commercial/services firms

whose employment structure is more stable and who, together with

the government, dominate the colony's political and economic

structure.

If we look at wage trends over the past few years, it is clear

that this system has not worked unequivocally in the interests of

workers' welfare. The position most commonly adopted by those

managers who accept that it is employers who dictate the level of

wages is to point to real wage increases during the decade ending

in the early 1970's as evidence of their paternalistic concern for

the well being of HK as a whole, "keeping one step ahead", ie pay-

ing out a little more than the rise in the cost of living every

year, to keep the workers happy. But since 1973, labour's share

has declined (see the latest economic report from Haddon-Cave's

office); even now, while output and prices have risen to beyond

1973 levels and employment is about the same as then, real wages

are still below the 1973 level. Inflation has been relatively low

in HK, while world prices have risen fast; so employers have

clearly benefited from the shock which the recession gave HK's

labour force ("very good for discipline", said one employer) and

profits have recovered faster than wages so far. No-one has tried

to put to the test how much profits could be squeezed in favour of

social expenditure and wages, but the evidence for HK points to the

inference that the present division of value between capital and

labour is more favourable to capital than has been the case in the

recent past a clear indication that wages are not determined by

market forces ("the discipline of the world market for our exports"

and all that).

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