Why dishwashers earn more in Hong Kong than in most places

What do worker complaints about long working hours, parental dissatisfaction with the Territory-wide System Assessment (TSA), dishwasher salaries, and earnings inequality have in common? They are all symptoms of two wider developments in society that need urgent attention.

First, the labour market has become increasingly tight as our labour force is no longer growing as fast as it used to for demographic reasons.

Second, the number of more educated workers is too low relative to less educated workers.

The increasing shortage of educated skilled workers has driven up the private rate of return to schooling continuously over time: among men for first-degree education from 16.2 per cent in 1976 to 25.1 per cent in 2014, and for secondary school education from 11.6 per cent in 1976 to 14.2 per cent in 2014. The rate of return to primary school education has actually fallen from 4.7 per cent in 1976 to 0 per cent in 2014. The results are similar for women.

READ MORE: HK$12,000 to wash dishes? Hong Kong financial chief John Tsang laments effect of ‘soaring’ wages of the low-skilled on city’s business owners

Why has this happened? The simple answer is that the economy has been growing continuously due to technological progress, and markets have become more efficient and better integrated in the world. Hong Kong has a very tight labour market. But the shortage of skilled workers remains far more severe than that of unskilled workers. This drives up the rate of return to schooling for the skilled.