The View
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Hong Kong must drop the ‘fortress mentality’ if it’s to avoid a labour crisis

A fortress mentality towards the admission of immigrants has made it impossible to mitigate the effects on the workforce of low fertility rates

PUBLISHED : Tuesday, 31 October, 2017, 1:07pm
UPDATED : Wednesday, 01 November, 2017, 9:35am

Hong Kong has a current labour force (not including foreign domestic helpers) of 3.64 million that is projected to peak in four years at 3.68 million. Thereafter, the workforce will continue to decline uninterrupted at an average annual rate of 0.36 per cent to 3.13 million by 2066. If this forecast comes true, surely the future of Hong Kong as an economic powerhouse is in jeopardy.

Declining fertility rates have driven us into this dire state. But more importantly, a fortress mentality towards the admission of foreign workers and immigrants has made it impossible to mitigate the effects of low fertility rates.

Consider Singapore’s contrasting experience. Its labour force increased at an average annual rate of 2.4 per cent between 1986 and 2016, while Hong Kong’s grew at a mere 1.0 per cent.

London and New York City could not have become global economic centres if they were powered only by the offspring of their original inhabitants

The quality of Singapore’s resident population as measured by average years of schooling has also overtaken Hong Kong, having been lower up until 2001.

In today’s knowledge economy, I find this a compelling explanation for why Singapore’s GDP per capita was US$53,000 in 2016, more than a fifth higher than Hong Kong’s US$44,000.

Sustaining economic growth does not necessarily require a city to grow its population. What matters vitally is its ability to attract talent from outside the city’s boundaries to come and enrich its labour pool. London and New York City could not have become global economic centres if they were powered only by the offspring of their original inhabitants.

Hong Kong’s future labour shortfall will have two main features. First, most of the population decline in the next 25 years will be among the younger labour force (age below 45), whose numbers are predicted to fall from 1.97 million in 2016 to 1.49 million by 2041.

Second, most of that decline will be in the male workforce, falling from 1.99 million in 2016 to 1.80 million in 2041. The female labour force will rise moderately from 1.63 in 2016 to 1.67 million in 2041.

The importance of addressing the younger labour shortage cannot be underestimated because they are the most creative and dynamic element of the workforce

The drop in the younger labour force is of particular concern because it means the problem can only be corrected by attracting foreign workers and immigrants. This will be very difficult given our fortress mentality, our heightened localist political sentiments, and highly divisive politics.

The government has been targeting the descendants of Hong Kong emigrants. This is politically wise, but its effectiveness is not clear. It will require policy change in the form of recognition of overseas professional qualifications, a choice education curriculum for their children, quality health care and affordable housing through home ownership.

The importance of addressing the younger labour shortage cannot be underestimated because they are the most creative and dynamic element of the workforce. Most individuals start their businesses relatively young and become employers after gaining 10 years of work experience.

The percentage of employers among economically active 30-39 year olds has been declining since the mid-1990s, from about 7-8 per cent to a present low of around 3 per cent. This implies the number of new entrepreneurs has been falling.

The primary reason for this is Hong Kong’s changing demographic structure. The number of men aged 30 to 39 has declined by more than 120,000 over the past 25 years, while the number of females in that age group has increased by over 120,000 as immigrant women from the mainland have arrived through cross-border marriages and family reunion.

If there is no political breakthrough in attracting foreign workers and immigrants, then it will be imperative that we upgrade our labour force quality. This challenge will have to be met by drawing from the younger female population because their numbers are growing faster.

Women will make up half the total labour force in the future, if not more. More importantly, the number of women with tertiary education (both degree and non-degree qualifications) has been increasing at a significantly faster pace than men among 30-39 year olds. Within the tertiary-educated workforce they will be in the majority. This will require a shift in workplace practices and policies.

This presents an opportunity for Hong Kong to become one of the first cities with a female-dominated workforce in the coming decade. The city could rise to become a shining example to the world, a place where men and women forge a new division of labour both at home and in the workplace.

As often in history, major transformations are seldom planned and anticipated. Life asks that we make it work for everyone going forward. Electing our first female chief executive into office this year is therefore a fitting sign of the times.

Richard Wong is Professor of Economics and Philip Wong Kennedy Wong Professor in Political Economy at the School of Economics and Finance, University of Hong Kong

Illustration: Henry Wong

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