10 June 2007

On the subject of civil service pay adjustments, I want to make one thing clear from the start - I don't have anything against civil servants, nor does the Liberal Party. We admire them for their dedication and hard work, and we fully support them receiving a fair and generous living standard.

Why then, you may ask, am I against civil servants receiving pay rises of between 4.62 and 4.96 per cent? Why then do I stand in opposition to what would be the first increases in salaries for Hong Kong's civil servants in seven years?

The reason I oppose the recommendations is that they go beyond the fair and generous. They allow for pay rises that are lavish and unjustified, that are unfair to Hong Kong's private sector working population, and that could undermine the very foundations of our city's free market principle.

The fundamental problem with the Pay Trend Survey isn't the sums don't add up: It is that the sums have been done all wrong in the first place. They ignore a lot of Hong Kong's basic economic realities.

Small and medium enterprises, or SMEs, account for 99 per cent of all companies in Hong Kong and employ 68 per cent of our labour force.

However, you will see that despite the huge role they play in our economy, SMEs are massively under-represented in the survey. They accounted for just 21 per cent of the total companies surveyed - i.e. 19 out of a total of 91 companies sampled. Moreover, of those SMEs that were surveyed, all employed between 50 and 100 staff, whereas in reality, 98 per cent of SMES have workforces of less than 50.

Smaller firms generally pay lower wages, and yet they account for a huge part of our economy. How can the government claim the survey is a fair reflection of private sector pay when these people - all taxpayers who help pay the wages of civil servants - were under-represented?

There are problems too with the Pay Level Survey and the Starting Salaries Survey. Both surveys focussed only on companies employing 100 staff or more - in other words, the tiny minority of large companies with big staff budgets to match.

Using government Pay Level Survey that does not take into account pensions and medical benefits and use a benchmark of the upper 75 per cent of private sector pay as a basis for comparison, civil servants are still being paid five per cent more than the market rate. A pay rise of another 4.6 to 4.9 per cent would only push them farther ahead by 10% of the private sector and in doing so make the gulf between them even wider. If we further take into account their generous pension plans and medical benefits, their total package will be about 30% higher.

Also, the Starting Salaries Survey, published in May, has led to proposals to increase starting salaries for civil servants by between 6.2 per cent to more than 30 per cent - increases that would surely trigger an avalanche of demands for more pay from more private sector employees.

"Does it matter?" you might ask. Why shouldn't civil servants enjoy the fruits of our economic recovery? After all, people in the private sector are getting pay rises so surely civil servants deserve them too after years of pay freeze?

My answer is that, yes, it matters a great deal. I share the view that civil servants should receive a fair and generous living wage but the proposed pay rises are grossly unfair to the millions of private sector workers whose selective earnings the proposals are based upon. And we would as taxpayers, all pay the price for that.

For example, graduates from the University of Hong Kong and Chinese University receive private sector starting salaries of HK$15,000 a month. And yet similar fresh graduates with no work experience will go into teaching jobs with a starting salary of HK$24,052, 60 per cent higher, thanks to a 30 per cent hike proposed by the Starting Salaries Survey. Is that fair?

Another example, an executive officer grade two will see his starting salary increased from $16,165 to $20,865, far more than his fellow graduates receive in the private sector. Is that fair? Also, a liaison officer grade two with two A level passes and three HKCEE credits will see his starting pay jump from $11,905 to $15,215, far more than any other school leaver taking up a job with a private company. Is that fair?

If we allow these pay rises, it will trigger a chain reaction of pay demands from public organisations and sub-vented organisations that will cost us $5.3 billion dollars a year. Small companies will then face the pressure of staff demanding similar pay rises or resigning to work in the more lucrative public sector.

On the other hand, for less than it would cost to award these civil service pay rises, we could meet funding for a variety of more worthy social causes. For example, we could plough 1.4 billion dollars a year into providing more help for the disadvantaged. We could pay out 1.5 billion dollars to strengthen support to non-CSSA recipient low income families and to set up a one-stop support service for the victims of family and sexual violence. We could spend 0.8 billion easing the burden on families caring for the elderly and handicapped. We could pay out 0.4 billion dollars and give more support to single parents and new migrant families. The above total of 4.1 billion dollars were constantly debated in the Legislative Council.

Civil service pay in Hong Kong has for decades been significantly higher than private sector pay. Despite the corrections of the last five years, the gap remains substantial. If pension and medical benefits are taken into account, civil servants are already 30 per cent better off than their counterparts in the private sector. There is no justification for making the gap even greater.

Everyone in Hong Kong suffered during the economic downturn. Some people had pay cuts. Some people lost their jobs. Some people saw their businesses go under. Civil servants were fortune enough to be shielded from the worst of it in the last 10 years.

It is only now that people in the private sector are beginning to make up lost ground as they get their first pay rises since the economic recovery.

Certainly, now is not the time to tell those employees that more of their taxes will be going into the pockets of the already well-paid civil servants. Now is not the time for the government to fuel demands by labour unions for higher pay that will threaten our economic revival. We believe taxpayers would prefer to see the 5.3 billion pay rises cost being spent on more pressing and worthy causes, such as helping our poor, improving education and health care.

The argument for an increase today in civil servant salaries is fatally flawed. I'm sorry to say this to government and civil servants, that you are still a long way out in front in terms of salaries. Let's give everyone else the chance to catch up first before we consider giving in to your demands for more.