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HONG KONG URBAN COUNCIL

That is all very well in theory. In practice the Pay Trend Survey commissioned by the Standing Commission has consistently produced increases which are larger than the net-of-merit increase in the private sector. Consequently the resultant awards in April have been both inflated and inflationary. Despite wide-spread dissatisfaction among participating employers, the Government has so far been unable to remedy the shortcomings of this survey. This must be done!

Both The Employers Federation of Hong Kong and The Hong Kong Institute of Personnel Management have recently suggested that the whole methodology of the present system should be subjected to an independent audit, and I would like to support that suggestion. At present the survey results are regarded as unreliable by both the civil service's unions and the private sector employers who provide the data. It is not difficult to see why.

Let me give you an example of the results produced. According to surveys carried out by the Census and Statistics Department, overall wages in Hong Kong increased by a total, and I repeat, total of 46.5% in the 5-year period from March 1982 to June 1987. In about the same period, i.e. from April 1982 to April 1987, in annual April pay adjustments civil service salaries (at the bottom of Model Scale 1 and the Master Pay Scale) were increased by 54.7%. However this 54.7% is exclusive of the annual scale increments. This means that a civil servant at the bottom of his scale would have had five annual increments in addition to the 54.7%. His total percentage increase could be 96%, or double the increase found by Census and Statistics in Hong Kong salaries overall!

Looking to this year, the indications are that the average private sector increase at 1 January is about 10% to 11%. If we assume that out of that total, 3% to 4% was for merit, then we would expect the findings of the Pay Trend Survey to be in the area of 6% to 7%. Under normal circumstances one would therefore expect that the award to Government employees on April 1st would not be greater than 7%.

However the issue is complicated this year by the results of a Pay Level Survey conducted by an independent consultant for the Government. Completed at the end 1986, this pay level survey clearly indicates that if you take into account total pay and fringe benefits, the public sector is substantially ahead of corresponding jobs in the private sector.

In early 1986, when this survey was commissioned, Government indicated that appropriate adjustments would be made when the results were known. (One presumes both upward or downward adjustment(s) could be possible.) Now that the pay level survey has concluded that civil servants packages in many areas are higher than the better paid companies in the private sector, one expects the Government will act to bring its pay levels more in-line with those in the private sector, Courageous steps will be needed if the Government intends to achieve results.

HONG KONG URBAN COUNCIL

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No doubt Government will be reminded of the current tight labour market. It will also be warned of the danger of damaging the morale of the civil service. The fact is the tight labour market is a situation that both public and private sectors have to learn to cope with, primarily by increasing productivity.

Turning to the civil service morale issue. This problem has been with us for a long time. As we all know there are many other factors, e.g. job satisfaction, promotional prospects etc. affecting morale.

I feel the morale question—used perhaps as a threat—is a disservice to our civil servants. I believe they are fair-minded people, and not solely motivated by monetary rewards. The Government on its part as employers, surely know that effective management depends on leadership and not on the cheque book!

Having said all this, it is my sincere wish to see the public sector fairly rewarded. With the change of sovereignty in 1997, Hong Kong needs an efficient, professional and dedicated public administration.

However with:

(1) pay increases of the current frequency and size; and

(2) pay levels much higher than the private sector;

the Government is leading rather than following the private sector. The result is a vicious cycle in which the Government and employers in the private sector, though unwillingly, are pushing the economy into inflation through failure to find a sensible way to adjust civil servants' remunerative package. Any concrete steps to rectify the situation will be difficult, but will be appreciated as a clear sign from the Government that it is committed to the overall well-being of Hong Kong!

Hong Kong workers in both the private and public sectors have deservedly enjoyed consistent and substantial real growth in income, particularly in years when inflation has not been high. However, there must be a limit to what the economy can afford, without pricing ourselves out of world markets.

I would now like to turn to another subject: the communication gap regarding the Hong Kong dollar link.

The Hong Kong Government tries to be an open Government. Yet, incredibly, it permits disturbing gaps to persist in terms of its communication with the public even in important and often controversial issues. There are many examples of this but today I would only touch on a current and major concern i.e. the Hong Kong and US dollar link.

I, for one, support the Government's firm stand as regards maintaining a link between the Hong Kong dollar and the US currency. I also believe the Government when it says it will do everything possible to protect the existing exchange rate with the US dollar. However, I do not understand the reasons for this inflexibility towards the rate at which it is pegged.

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