Public pressure has sent a clear message to the Government that civil service salaries are too high.
As a result, a 4.75 per cent reduction has been proposed, but senior government officials are still trying to defend a bureaucratic formula (known as the 'pay mechanism') as the means of fixing government salaries. The pay mechanism is a colonial relic which has, over a period of time, created a massive gap between private-sector salaries and civil servants' salaries, by means of 'across the board' increases to the salaries of middle- and high-level government officials.
Over the last 30 years, Hong Kong has experienced several economic downturns, resulting in job losses, downsizing, and lower salary levels in the private sector. During these downturns, government salaries have never been reduced and have frequently been increased, widening the salaries gap. When economic upturns occur and the private sector justifies higher salaries to attract staff, the pay mechanism is used to justify further increases for government officials. The pay mechanism's defects became obvious last June when a five per cent rise was awarded to government staff in the midst of extensive lay-offs and pay cuts in the private sector, and warnings of worse to come.
Two political factors have driven government salaries to excessive levels. British expatriates, politically loyal to Britain, and having in some cases special skills, originally formed the basis of the colonial civil service. They were paid high salaries and given expensive perks, such as long home leave, free education and medical care, travel allowances and free and generous pensions. Local recruits were paid according to local market levels. By the 1970s, political correctness demanded that local staff in government be paid the same as expats. A substantial upgrading followed.
The result is that the civil service of Hong Kong is effectively being paid 'across the board' on artificially high 'expat' terms. Government administrators, executives, and professionals carrying out normal functions of government work are being paid $90,000 to $120,000 per month and others are on much higher salaries. In Britain, these government jobs are paid only around $40,000 per month maximum.
Even Prime Minister Tony Blair is only paid $150,000 and his cabinet ministers $110,000 per month.