(This essay was published in the South China Morning Post on 1 November 2017.)
Hong Kong has a current labor force (not including foreign domestic helpers) of 3.64 million that is projected to peak in four years at 3.68 million. Thereafter, the labor force 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 has a very weak hand.
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 labor 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.
The quality of Singapore’s resident population as measured by average years of schooling has also overtaken Hong Kong, after being lower than Hong Kong’s up to 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, a significant 21 per cent 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 talents from outside the city’s boundaries to come and enrich its labor pool. London and New York City could not have become global economic centers if their cities were powered only by the offspring of their original inhabitants.
Hong Kong’s future labor shortfall will have two main features. First, most of the population decline in the next 25 years will be among the younger labor force (age below 45), whose numbers are predicted to fall from 1.97 million in 2016 to 1.49 million in 2041.
Second, most of that decline will be in the male labor force, falling from 1.99 million in 2016 to 1.80 million in 2041. The female labor force will rise moderately from 1.63 in 2016 to 1.67 million in 2041.
The slow growth of the younger labor 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 homeownership.
The importance of addressing the younger labor force shortage cannot be underestimated because they are the most creative and dynamic element of the labor force. 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 only 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 (see Chart). The number of men aged 30-39 has declined by more than 120,000 over the past 25 years, while the number of women 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 labor force quality. This 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 labor force in 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 first female-dominated workforce in the coming decade. The city could rise to become the world’s shining city on the hill, where men and women forge a new division of labor 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.