Union Man

I will let you in on a little secret. More than 50 years ago in the UK I was a fully paid up member of the British Labour Party. I even acted as agent in a local election there. And nearly 40 years ago here in Hong Kong I was vice president of a civil service staff association which negotiated with the government on pay and related issues. I guess you could say I am by instinct something of a union man.

So it pains me to write these words. But I cannot see any way to justify the pay rise that our civil servants are now asking for.

Every year there is an exercise to monitor pay trends in the private sector, and the outcome of the survey forms the basis for setting the civil service pay adjustment for the coming year.

This year the Pay Trend Survey Committee, after reviewing returns from 111 companies that provided information, concluded that pay rises had risen by 2.04% for those in the lower band (earning below $24,070 per month), 4.55% for those in the middle band ($24,070 - $73.775) and 7.26% for those in the upper band ($73,776 - $150,915). These findings will be submitted to the executive council shortly together with staff reactions and government proposals. In the past the rate for the lower band has sometimes been rounded up to match the middle band.

Reaction to the figures has been along fairly predictable lines. The civil servants generally want the numbers to be adopted and are looking forward to a substantial pay rise. Mindful of morale, civil service chief Patrick Nip Tak-kuen has been making supportive noises. Private sector employers on the other hand are aghast at the implications for businesses. The Hong Kong General Chamber of Commerce has spoken out unusually strongly, saying the numbers are out of touch with reality and do not reflect the current economic situation. The stage is set for a confrontation.

In fairness, one union leader, Hong Kong Chinese Civil Servants Association president Li Kwai -yin has recognized the danger and suggested a compromise of 5.3% to match inflation over the last two years.

Before setting out my own views, I want to make clear that I am in no way criticizing the members of the Pay Trend Survey Committee. They have simply collected and collated the data in accordance with a formula and methodology set out by the executive council some 15 years ago. I am sure they have acted in all respects professionally. The problem is the formula is no longer fit for purpose. It needs to be reviewed probably together with another fundamental pay level review. Given the radically changed circumstances currently prevailing, it certainly cannot be applied to the 2022 adjustment.

What are the factors that lead me to this view? First, although the Committee’s report has not been (and will not be) published in full, it is understood that around 160 companies were approached as part of the survey, and the findings are based on returns from the 111 who actually replied. It does not take a great deal of imagination to work out why more than a quarter did not respond. Many companies have closed down or sharply scaled back their Hong Kong operations. Fitness Clubs, bars, hair salons, beauty parlours, restaurants, tourist agencies, airlines, travel companies have all been hard hit by the pandemic and the related government containment policies. Our two major theme parks have been ordered to close for long periods. As the Floating Restaurant prepared to leave our city, it was a poignant symbol of the collapse of the tourism industry which will take many years to recover. The formula does not address the missing information. How could it?

The second issue is security of employment. The “iron rice bowl” enjoyed by the civil service has always been known about but the contrast with life in the private sector has never been sharper than this year. Over 200,000 employees there have lost their jobs. Not a single civil servant has been laid off. Our economy shrank by four per cent year on year in the first quarter. The unemployment rate reached 5.4 per cent in April and is expected to rise further in coming months.

Moreover even these grim statistics do not convey the full picture. Many staff who kept their jobs were forced to take no paid leave for part of each month. Others had their rostering arrangements reduced with missing days being deducted from their leave balance. But factors like these only apply to those in formal employment. There are thousands of people who work for themselves, or in informal employment or part-time, who only get paid when there is work for them to do. All these people have suffered substantial loss of income even if they are not technically unemployed. Losses have also been incurred by those who rely on rental income from property, or ownership of taxi licences.

Against the backdrop of hundreds of thousands having lost their jobs completely, and potentially millions more having suffered a drop in income, it is difficult to see the community accepting with equanimity an increase of up to seven per cent for those who are already among the highest paid and are in guaranteed employment.

Taking all the conflicting factors in to account, it is clear there is no easy way forward for the government. One temptation for the outgoing administration might be to play for time, and kick the can down the road until after I July. But I don’t think our incumbent chief executive has ducking decisions in her make-up. She may get them wrong, but she takes them.

Perhaps two percent across the board and take all the disappointment with her?