Pay survey findings pose political dilemma

PUBLISHED : Tuesday, 19 May, 2009, 12:00am
UPDATED : Tuesday, 19 May, 2009, 12:00am

Civil servants are envied for their job security and protected pay and perks. They can, therefore, expect little sympathy over the results of the annual pay trend survey. This suggests their salaries should be cut to reflect a recent drop in private sector pay. It is up to the government whether to introduce cuts and up to lawmakers whether to approve. But it is not a simple matter of relative pay justice during hard economic times. As a leading employer, the government will have to weigh implications for the wider community.

Pay in the private sector in the year to April fell behind comparable civil service salary bands by 5.38 per cent in the top tier, 1.98 per cent in the middle and 0.96 per cent in the lower tier. This will be considered in determining civil-service pay from July, along with economic conditions and the government's financial position.

Hong Kong's economy shrank by 7.8 per cent year on year in the last quarter, the biggest fall since the Asian financial crisis, and the government has dug deep into its reserves to cushion the impact of the current downturn. Anticipating the pay trend results, the largest civil service staff union came out three weeks ago in favour of a pay freeze, a result for which to be grateful given the economic criteria.

The political dilemma for the government is that if it cuts civil-service pay, it will be seen as giving a lead to the private sector that could have a snowball effect; if it does not, it will be seen as using taxpayers' money to shield a privileged group from the pain suffered by the rest of the community. Because a pay cut needs to be approved by the Legislative Council, the dilemma for lawmakers is that if they pass it, they will be accused of aggravating grass-roots economic woes.

On balance, a civil-service pay freeze would have political appeal. There would also be no need to trouble lawmakers with legislation.

But a freeze is arguable only for the lower tier earning less than HK$15,785 a month - a large proportion of civil servants - since the indicated pay cut is small but would cause disproportionate hardship. It is hard to argue that better-paid civil servants should not share the pain. Pay trend indicators are an effective mechanism for maintaining fair relativity only if salaries can go down as well as up. Sharp departures from them can undermine it and be unhelpful to future pay negotiations. What if private-sector pay regains lost ground and no more, while civil-service pay is frozen? Will civil servants accept the argument that the freeze should continue?

It should also be remembered that while civil servants did not share in private-sector pay rises before the economic woes began, nor did they suffer the job cuts that followed. On social and economic grounds, the government should have no fear about reflecting the community pay trend for better paid employees.