Cutting pay of Hong Kong’s civil servants could trigger exodus, economists and political analysts warn
- In his budget last week, Financial Secretary Paul Chan decided against trimming pay of government workers, opting instead for zero growth in headcount
- City’s need to retain civil servants makes it difficult for deficit-hit government to slash their pay and save taxpayers HK$40 billion
Hong Kong’s need to retain civil servants and its reliance on them to implement a series of economy-boosting projects have made it difficult for the deficit-hit government to slash their pay and save taxpayers HK$40 billion (US$5.11 billion), economists and political analysts have said.
Calls to adjust the salaries of government workers mounted ahead of last week’s budget, which put the deficit for 2023-24 at HK$101.6 billion. But Financial Secretary Paul Chan Mo-po has cautioned against the move.
“We estimate the economy will improve in the coming years, during which employees in the private sector might expect a salary rise,” Chan told a radio programme on Monday. “We don’t want our conduct, like cutting pay, to have any negative impact on the market.”
Instead, Chan’s budget proposed zero growth in the civil service and cutting recurrent government expenditure by 1 per cent for three consecutive years, which altogether could save up to HK$11.7 billion in 2026-27.
Civil Service salary adjustments are done annually with consideration being given to the net pay trend indicators derived from the annual pay trend survey, the state of the economy, changes in the cost of living, the government’s fiscal position, the staff sides’ pay claims and morale.
According to the Civil Service Bureau, remuneration and other expenditure on civil servants reached HK$149.1 billion in 2022-23, or about 22 per cent of all government spending. The proportion went down by about 3.3 percentage points from that recorded in 2021-22.
Economist Simon Lee Siu-po, an honorary fellow at the Asia-Pacific Institute of Business at the Chinese University of Hong Kong, argued the government should slash civil servants’ pay since it amounted to the biggest part of government expenditure.
“We should focus on the area that can help the most,” Lee said, noting a 10 per cent pay cut would save about HK$40 billion compared with the less than HK$10 billion saved through a pay freeze.
Political parties, such as the city’s sole opposition one, the Democratic Party, and the Bauhinia Party, which is led by mainland Chinese executives, have backed the idea of cutting the pay of high-ranking officials, with the latter suggesting a 10 per cent reduction for those who earned HK$150,000 a month or more.
Civil servant salaries were cut in 2002, when the city’s economy was severely battered by the Asian financial crisis and severe acute respiratory syndrome.
Then-financial secretary Antony Leung Kam-chung had suggested a 4.75 per cent pay cut for 184,000 civil servants in his budget to save about HK$6 billion a year. The proposal prompted more than 30,000 government workers to take to the streets to protest against the decision.
The government later adopted a “0-3-3” proposal, under which civil servants had their pay frozen in the first year and cut by 3 per cent in each of the following two years.
The city’s principal officials, however, have undergone four rounds of pay cuts, including one in 2020 when former chief executive Carrie Lam Cheng Yuet-ngor announced that her salary, and also those of her ministers, would be cut by 10 per cent for a year.
But analysts warned that cutting the pay of all civil servants risked triggering an exodus of government workers.
“If the government decides to cut civil servants’ pay, it is sure that more workers will leave the service,” said lawmaker Dennis Leung Tsz-wing, who chairs the legislature’s panel on public service.
Leung noted civil servants were “quite a catch” in the private sector given their knowledge of the government and how it functioned.
“A [pay cut on] civil servants would no doubt influence the work, raising public concerns over the city’s overall development,” he said.
A record number of civil servants quit following the 2019 anti-government protests, with more than 3,863 resignations in the 2022-23 financial year and 3,734 during the previous one.
As of December last year, 172,610 residents worked for the government, which had 192,315 positions, more than 19,000 of which remained unfilled.
Leung Chau-ting, founder and chairman of the Federation of Civil Service Unions, said morale had been “very low” among civil servants for a long time, warning any pay freeze or cut would force more young workers to leave and discourage new ones from joining the service.
Associate Professor Billy Mak Sui-choi, of Baptist University’s accountancy, economics and finance department, agreed there was no pressing need to freeze or slash civil servants’ pay, saying any such move would more serve to placate a public displeased with the government than offer a cure to the deficit.
