Market forces set to be the ultimate arbiter in disputes

AGAINST the background of the cabin crew strike at Cathay Pacific Airways, out-going Secretary for Monetary Affairs David Nendick warned yesterday that in a competitive and inflationary environment, spiralling wages would force employers to take harsh measures.

In a wide-ranging discussion on the state of the local economy, Mr Nendick, who is scheduled to retire at the end of the month, said market forces would decide the outcome of labour disputes.

''Obviously, if labour is too expensive the end result is that the services that are provided by the employers of labour become uncompetitive.

''Clearly, there's a trade-off between jobs and pay, and if people insist on being paid too much - and I'm not being specific about the Cathay Pacific situation - then there will be fewer people who will be employed.'' With a persistent annual inflation rate of nearly 10 per cent and unemployment down to less than two per cent, local employers have had to shoulder hefty annual wage increases to retain staff.

The Cathay dispute is seen as a harbinger of the end of a business environment which has thus far enjoyed a relatively compliant workforce.

At the end of the day, Mr Nendick said, the marketplace would determine what could be paid in wages and salaries.