Hong Kong expected to extend civil servant pay freeze for another year amid struggling economy

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Hong Kong is expected to extend a civil servant pay freeze for another year, with the administration citing an economy that has yet to fully recover from the coronavirus pandemic.

The offer, made on Tuesday by the Executive Council, Chief Executive Carrie Lam Cheng Yuet-ngor’s de facto cabinet, came in response to demands from civil service unions that had publicly called for the freeze, fearing 2021-22 salaries could be cut instead.

Further consultation between the Civil Service Bureau and the unions, which represent many of the city’s 170,000 public servants, will take place before the council makes a final decision.

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According to the findings of the Pay Trend Survey Committee, which helps determine government employee wages, those in the upper, middle and lower salary bands could have faced pay cuts of 2.04 per cent, 0.54 per cent and 0.68 per cent, respectively.

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A spokesman for the Civil Service Bureau on Tuesday said Exco made its initial decision to freeze pay after taking into account the survey, the state of Hong Kong’s economy, changes in the cost of living, the government’s fiscal position, staff pay demands and workforce morale.

“There are unfavourable and encouraging factors at the same time as far as the state of the economy is concerned. While the unemployment rate still stands at a high level, the state of the economy has shown a clear trend of recovery,” he said.

“Real gross domestic product is forecast to grow by 3.5 per cent to 5.5 per cent in 2021, and real GDP resumed appreciable year-on-year growth of 7.9 per cent in the first quarter of 2021.”

Unions representing Hong Kong’s civil servants called for the pay freeze, fearing cuts to salaries were the most likely alternative. Photo: Nora Tam
Unions representing Hong Kong’s civil servants called for the pay freeze, fearing cuts to salaries were the most likely alternative. Photo: Nora Tam

The spokesman also said that while the impact of the coronavirus crisis was tremendously negative for various local industries, labour market conditions were likely to improve in the period ahead as the economy continued to recover, particularly if the pandemic remained well contained.

“Local inflation may go up slightly alongside the recovering economy. At the same time, the efforts and contributions of civil servants at all ranks in fighting the pandemic over the past year are worthy of recognition,” he added.

In a statement, the Government Employees Association, which has more than 40,000 members, said it was disappointed that the government refused to offer civil servants even a modest pay rise to keep up with inflation. In April, Hong Kong’s year-on-year inflation rate was 0.8 per cent.

But senior civil service staff representatives Li Kwai-yin and Lee Fong-chung, who wield substantial influence when it comes to government decisions regarding pay, said they welcomed the extension of the freeze.

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Li, president of the Hong Kong Chinese Civil Servants’ Association, which represents a third of government workers, said the offer was balanced.

“It can avoid creating controversy and social division,” she said. “Some sectors were hard hit by the pandemic, and many people had to take unpaid leave. If we get a pay rise, civil servants will be put on the opposite side of the rest of the workforce. This is not good for public unity when society needs to stand together to fight the coronavirus.”

Lee, chairman of the Hong Kong Senior Government Officers Association, said he would agree to the pay freeze, as a cut would be inconsistent with the broader improvements in the city’s economy.

Leung Chau-ting, chief executive of the Hong Kong Federation of Civil Service Unions, said public sector workers would understand that a pay freeze was needed, as the economy had just started to recover.

Union leaders previously argued authorities should not cut civil servants’ pay, given they had been on the front line fighting the Covid-19 pandemic and protecting their fellow residents’ health.

Additional reporting by Lilian Cheng

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