TNAG-1064-FCO40-1314-Labour-relations-in-Hong-Kong-Professor-H-A-F-Turner-s-stud-1981 — Page 4

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HIGR 212/1 5.

HIR 241

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Turner's social security recommendations are viewed by the

o Hong Kong Government as greatly at variance with their general

policy of minimal intervention. On a contributary unemployment and pension scheme, they have commented that it would be 1981 difficult to devise and complicated to administer, and that it would

interfere with the natural workings of an open market in curing unemployment, through lower wages. Careful thought would however be given in Hong Kong to providing equivalent benefits through other means.

6.

The Economists, in their commentary of August 1980, advised that, while in a large number of industrialised countries social security is accepted to be a public responsibility, social insurance cover could be provided by private insurance companies in Hong Kong without any Government involvement. They also expressed doubt as to whether the workers in Turner's survey realised the full economic cost of the social services they envisaged or would be prepared to pay for them.

7. There are differing views as to how much social security the Hong Kong Government can afford. The maximum average tax rate in Hong Kong is low by international standards and it may be argued that there are substantial reserves of taxable capacity to finance an expansion of social services. There is however the argument that, with Hong Kong's dependence on external competitiveness, even a small increase in tax rates could result in international companies locating their operations elsewhere. The Economists take the view that an expansion of social security provisions is unlikely to lead to a fall in growth.

8. Mr Hurst endorsed Turner's recommendation and was disappointed by Hong Kong's reaction, which he feared would be difficult to defend if MPs or trade unionists took up the cudgels. He saw a risk that recession might lead to mass unemployment and consequent civil disorder, particularly if it becomes an occasion for political agitation. The case for an old-age pension he based on the relative low level of wages that allows little accumulation of funds for old-age, and the weakening of the extended family system that would traditionally guarantee care for the elderly.

HONG KONG & GENERAL DEPARTMENT

19 JUNE 1981

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