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Civil Servant Salary Increases Questioned
A scheduled pay-cut for civil servants in Hong Kong may make their mainland counterparts feel fortunate. But the issue is more complex than this.

Payment adjustments vary according to the practical status and policy design of different economies, but they do not change the role of civil service and commitment to the public.

Civil servants are not working for themselves, but for the public interest at large.

In times of adversity, they are to share the burden together with the rest of the community. This remark was made by Hong Kong Special Administrative Region Chief Executive Tung Chee-hwa, when the Legislative Council passed the pay-cut bill last Thursday after two days of heated debate.

As a result of the bill, starting from October 1, the salaries of 180,000 civil servants in Hong Kong will be reduced by 1.58 per cent to 4.42 per cent. The cut is expected to save the Hong Kong government about HK$3.1 billion (US$397 million) a year.

That civil servants should shoulder adversity together with the public was echoed by many residents in Hong Kong, who have already endured sharper salary cuts in many private businesses with the local economy at a downturn.

Such remarks about "sharing the burden" used to be the motto for civil servants in the mainland too, but it sounds less familiar now.

People tend to emphasize the low-income status of civil service here nowadays. But something more important is often neglected.

If civil servants in Hong Kong have to shoulder a pay cut to reduce government expenses, what can mainland civil servants contribute to their economy?

The question is being posed as they are soon expected to embrace their third salary increase in 18 months. The mainland government has justified the income rise as a measure to stimulate domestic demand, which remains weak as price indices have continued to fall over the past year.

The robust mainland economy also seems to give more support for the pay rise, while Hong Kong, which is facing a ballooning budge deficit, does not have much choice but to cut pay generally in spite of strong protests.

But the mainland has its own troubles too.

Mainland civil servants have already had two 15 per cent salary increases this year, one in March and one in October last year. And another is expected to be put into effect starting this month. However, the effect of this pay rise on stimulating personal consumption is limited.

Each pay rise increases government spending by more than 100 billion yuan (US$12.11 billion), though the beneficiaries only represent about 4 per cent of the total population in the country.

The potential consumption increase from civil servants is very limited whereas the fiscal burden has been reloaded, said economist Xu Hongyuan from the State Information Centre.

On the other hand, China's fiscal revenue growth declined in the first quarter of the year.

Xu echoed the opinion of many domestic economists, who are not supportive of the expected pay rise.

The groups that need the most help have been neglected, said Xu. They are the rural population and urban households with very low incomes.

Rural areas account for about 70 per cent of the population in China. Yet their income only has only seen a meagre 4 per cent increase over the past five years.

If the money used to increase the salaries of civil servants was allocated to help rural education and utilities construction, the root of the problem would be solved, said economist Dai Yuanchen.

China's economy is growing rapidly, but much of the growth has been underpinned by an expansionary fiscal policy, which certainly cannot last forever.

Improving conditions for low-income households is a fundamental cure stagnant domestic demand.

As for civil servants, when they are enjoying better payment, they should also work hard to improve the overall efficiency of the government and reduce administrative costs.

If they have benefited from various privileges, from salary increases to good welfare to secured employment, it is time for them to contribute more to the public.

And when personal interest conflicts with community interest at large, they should be able to make the right choice.

This has also been urged by Hong Kong Chief Executive Tung, who asked his civil servants to unite with the government to face the challenges posed by the economic restructuring. Tung still has to settle the row between the government and civil service on the pay-cut issue.

The situation may be more optimistic the mainland. But the essence of civil service is the same. And although civil servants now have better income expectations, which will enable them to live better, they are not paid to do just that.

(Business Weekly July 23, 2002)

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