Painful inflation nullifies wage increase impact

Inflation erased over half the value of wage increases that Hong Kong’s employees received in September 2011.

The average wage rate for all selected industry sections surveyed (as measured by the wage index) increased 9.9% in nominal terms in September over a year earlier, according to the Census & Statistics Department.

After discounting the effects of inflation as measured by the Consumer Price Index A, however, overall average wages plunged to 4.4% in real terms for all the selected industry sections surveyed.

For real payroll indices, year-on-year increases of 0.6% to 8.2% were recorded in the third quarter in the import/export and wholesale trades; retail trade; accommodation and food-service activities; information and communications; financial and insurance activities; real-estate activities; professional and business services and social and personal services sections.

Employees in manufacturing; sewerage, waste management and remediation activities and transportation, storage, postal and courier services sections, saw their wages plummet from 1.5% to 9%.

While wage hikes were across the board, those for workers in the lower segment saw more visible increases, bolstered in part by the implementation of statutory minimum wage. In real terms, the average wage rate grew 4.4%.

Chief Executive Donald Tsang last October said Hong Kong is under enormous inflationary pressure from rising wages. He repeated the government’s August estimate that inflation will accelerate to 5.4% in 2011, the fastest pace since 1997, from 2.38% in 2010.

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