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Letters | Why big pay rises for civil servants are bad economics
- While higher food and energy prices have affected households in Hong Kong, a prolonged and uncontrollable rise in wage growth will lead to more economic pain
- To break the inflation cycle and protect ordinary households, the government should avoid abnormally large wage increases for civil servants
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The Pay Trend Survey Committee is expected to submit its findings on Hong Kong wages to the government soon, with the recommendation to increase the salaries of civil servants by between 2.04 per cent and 7.26 per cent (“Hong Kong civil servants may get record 7.26 per cent pay bump under improved economic situation”, May 18).
While there is no doubt that higher food and energy prices in Hong Kong have impacted the standard of living in ordinary households, a prolonged and uncontrollable rise in wage growth will lead to even higher inflation, and ultimately, lower-income households will suffer more in the years to come.
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The fact is, wages rarely rise at the same rate as inflation. If an inflation cycle is not broken, it might lead to years of misery instead of a mediocre one-year increase in earnings. Hong Kong’s labour market is already becoming less tight, with the unemployment rate at a 12-month high. This means that if the market had its way, wage growth should be slowing down, not rising faster.
Despite knowing the United States economy will at best have a soft landing, the Federal Reserve has been working hard to break the current inflationary cycle by raising interest rates, and the Hong Kong Monetary Authority is now under increasing pressure to keep the Hong Kong dollar within its range in the Linked Exchange Rate System.
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The Hong Kong government has sought to lead by example, introducing social policies in the hope that they will be adopted in the broader business environment; one example is the working from home arrangements it pushed during the pandemic.
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