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Labour shortage threatens Hong Kong future

hong-kongHong Kong restaurant owner Hudson Chang says he can’t lower the bar much further for hiring staff.

He warns his employees repeatedly about sending messages on their iPhones during work hours. He pleads with them to be more pleasant to customers. Still, he can’t afford to fire anyone: He can’t be sure of finding a replacement.
“We don’t really have much choice,” said Chang, 39, owner of a venue called Indonesian Restaurant 1968 on the outskirts of the central business district. “I’m just looking for people with basic manners. You don’t even need specific qualifications. You just have to be mobile and know how to smile.”

Restaurants and construction companies struggling to attract staff may be a warning sign for a city that’s projected by the government to have growth-sapping labor shortages after 2018. Fifty-seven percent of Hong Kong employers are having trouble finding the right staff, the most since 2008, according to a report by ManpowerGroup. The conclusion: Hong Kong is edging closer to the demographic turning point where, like China, its workforce will shrink.

“Hong Kong employers report a considerably more pronounced talent shortage than their global peers,” said Lancy Chui, regional managing director of ManpowerGroup, a human resources company based in Milwaukee, Wisconsin. More than 80 percent of employers surveyed by the company said that staff shortages would affect their ability to serve clients and maintain competitiveness.
No Shows

At a French restaurant in Sheung Wan, an old urban area transformed by a mix of local and western eateries, manager Thierry Perreau complains he’s been left cooling his heels by job applicants who never showed up for their interviews.

“They didn’t even bother to call,” said Perreau, who has worked in the food and beverage business in the U.S. and France. “I’ve never seen this before.”

La Creperie, which describes itself as a family-owned restaurant specializing in crepes from the French province of Bretagne, is offering a salary of as much as HK$12,000 ($1,548) a month for wait staff and cooks to work nine hours a day, six days a week including weekends, according to Perreau.

Hong Kong’s labor force stood at 3.9 million as of August, out of the city’s population of 7.2 million. The unemployment rate was 3.3 percent in September and hasn’t exceeded 4 percent since Oct. 2010.

According to the labor force projections released by the Census and Statistics Department last year, the number of Hong Kong’s workers below age 55 will shrink by 60,000 by 2018 as the population dwindles. It estimates there will be a shortfall of 14,000 workers that year, assuming the city’s economy expands at 4 percent a year. With a higher growth rate, the deficit could reach 163,800 employees.
China Syndrome

That compares with mainland China, where the working population will peak within a few years, and labor shortages will appear between 2020 and 2025, according to a working paper published by the International Monetary Fund in January.

While the potential shortage highlighted by the Hong Kong government is years away, employers in retail, dining, and construction are already lamenting difficulties in attracting workers. Total job vacancies jumped 10 percent to 77,858 in June from a year earlier, according to a government report last month. Unfilled jobs at construction sites surged 74 percent to 1,025 in the month.

“The whole construction industry has faced a tight labor market for the past few years,” said Raymond Chan, president of the Hong Kong Institution of Engineers. “It’s the case for the professional engineers, technicians, and most seriously for the actual workers on construction sites.”
Big Projects

The supply of workers will become even more constrained as Hong Kong raises infrastructure spending, estimated to exceed HK$70 billion annually over the next few years. Ten major projects that the government announced in 2007 include an $8 billion railway that will connect Guangzhou on the mainland directly to Hong Kong and a 29.6-kilometer bridge linking the city to Macau and Zhuhai. The goals are to spur visitors, who already reached a record of 48.6 million last year, create jobs and deepen economic ties with the mainland.

Younger people are shunning the construction industry because of its tough manual labor and irregularity in wage payments, said Lam Chun Shun, a director at Wah Fai Engineering Co., which does metal and glass work. He says the average age of his workers is more than 45 years.

“Salary is not really an issue as it’s pretty good now, but still no one wants to enter the industry,” he said. The shortage is especially prominent in steel reinforcing, scaffolding, and nail-plating, where workers with the necessary skills are generally over 50 years old. Aging laborers mean the speed of completing projects is slower, he said.
Growing Old

Financial Secretary John Tsang said in February the proportion of people age 65 and older reached 14 percent last year and is expected to account for 30 percent by 2041.

There will be a deficit of 66,600 workers with upper secondary education in 2018 as baby boomers leave the workforce and employers raise their expectations for hiring, the government’s 2012 report said. Hong Kong is forecast to have a shortfall of 32,600 workers at undergraduate-degree level as the economy becomes “knowledge-based,” the government says.

Leung Chun-ying, the city’s chief executive, said in January the government may have to consider allowing the import of construction workers if domestic shortages persist, a discussion that has pitted industry groups against trade unions.
Foreign Maids

Hong Kong currently allows limited inflows of foreign workers. People from abroad can fill jobs at technician level or below under the Supplementary Labor Scheme, with 2,612 imported under this program as of June. Foreign domestic helpers, of which there were 312,395 in Hong Kong as of Dec. 31, mostly from Indonesia or the Philippines, apply through a different program.

“If you import workers, presumably because you can pay them lower wages, where would they live?” asked Kevin Lai, an economist at Daiwa Capital Markets Hong Kong Ltd. “Basically, Hong Kong’s economy is already at full capacity. Economic growth needs to slow down and let the pressure ease on the labor and housing markets.”

Higher wages may be the only way for some employers to attract workers, he said.

Hong Kong implemented a minimum wage in 2011 and raised it to HK$30 an hour starting May 1 in an attempt to narrow inequality that has fueled protests and labor unrest. Wah Fai’s metal and glass workers earn an average HK$1,000 a day, much more than the base rate, Lam said.
Wage Compromise

“Minimum wages appear to have increased the salary level in the past year, while vacancies are still found in many jobs,” said Randy Chiu, a human resources management professor at Hong Kong Baptist University. “The minimum wage level must be set at a compromise between affordability of small-medium enterprises and the actual needs of workers.”

As for Chang, he’s not able to offer substantially higher wages to attract more staff. He moved the restaurant from its ground-floor location in the Causeway Bay area, home to the world’s most expensive shopping strip last year, to a fifth-floor space after his landlord tripled the rent.

“I can’t raise the selling price and the rent keeps going up,” he said. “As long as I earn money, I don’t mind. But I don’t earn money, so how can I raise the salary?”

He said he has about 15 employees left after closing down his four other branches, and he’s always looking for more.

“My ad is posted 24/7, 365 days a year,” he said.-Bloomberg