The Employers’ Federation of Hong Kong has issued a press release “Pay and the economy” on 3 October 2007, claiming that “Hong Kong is enjoying a period of unprecedented growth” but warned that companies “must not be so foolish as to add to fixed costs today without being sure we can afford them tomorrow“, and that the Federation suggested to keep average salary increases below 2.5%.

A shockingly 2.5%
The Government has said Hong Kong’s economy is in better shape than it has ever been over the past 20 years. Whether it is a pluff or truth, undoubtedly the Hong Kong economy has been under a very rapid growth in 2007. I looked on the Internet, a page on Indexmudi shown that the estimated inflation rate (consumer prices) is around 2.20%, and the press by Bloomberg.com released on 23 April also reported a average of 2.0% in inflation. In that sense, Hong Kong employees should have an actual salary increase of 0.5% or less, as suggested by the Federation.

So as employees, are we demanding too much on sharing the fruits of the improved performance of our employers?

The reality check

Last year, on 4th October 2006, the Employers’ Federation of Hong Kong issued her annual press release and had already suggested that “the Federation considers that pay increases during the coming year should generally be less than 2.5%“. Well, so did the Federation succeeded?

So in Hong Kong we all believe in free economy, and the market of employment is governed by free flow of demand and supply of work force. that’s what make our job market effective and efficient. According to JobsDB, in 2006, the mean monthly salary of Assistant Engineer was HKD11,659, while that in Q1 of 2007 was HKD12,377. So the market reflected that a reasonable pay raise is around 6%, more than doubled to that the Fed suggested.

The working poor
People on CSSA (Comprehensive Social Security Assistance) would not be affected by inflation, because CSSA payments are index-linked. I feel anxious on entry level engineers (and other general workers of course), generally called graduate engineers or assistant engineers, since they are not making much. They rely on themselves, but they are not making much. When inflation comes, their quality of life may suffer. Engineers, many of us, do not work in down town, and many of us worked in more remote industrial area and even in mainland China. Despite the increased gap of RMB-HKD (that’s another really BIG issue), we also have to face the impact of inflation and raised cost in transport. Now the Kowloon Motor Bus Company (KMB) is applying for a 9% raise to its bus fare, if that was granted, we are paying much more on transport, considering we are only having a 6% increase on pay, and never mind the saying of 2.5%.

If the Fed’s suggestion is followed, I am foreseeing more people would be going on CSSA rather than work (which seems so stupid), and that would put a strain on welfare services and definitely not good news for neither the government nor the tax payers. Another scenario is that if a company is following the Fed’s suggestion on pay raise, she may faces Human Resources drain as I believe some companies would be conscious enough to make the correct decision.

Further reading:
Pay and the economy
a page on Indexmudi
press by Bloomberg.com
Salary report 2006
Salary report 2007 Q1

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