Recent Hays from Hong Kong release mentioned Hong Kong’s labour market is under pressure. Their global index diagnoses the pressure points in the country’s labour market.
The Hays Global Skills Index assesses the efficiency of the skilled labour market in 31 countries, or its ability to supply skilled labour. It provides a score for each country of between 0 and 10 which measures the pressures present in its labour market.
The score is calculated through an analysis of seven equally weighted indicators, each covering different dynamics of the labour market. Three indicators explore the supply of talent, namely education flexibility, labour market participation and labour market flexibility. One looks at talent mismatch. The final three are wage pressure indicators, looking at overall wage pressure, wage pressure in high-skill industries and wage pressure in high-skill occupations.
A score of 5.0 indicates a balanced picture for labour markets, a score close to 0 indicates less intense competition for vacancies, and a score close to 10 shows severe difficulty in finding skills.
The Hays Global Skills Index report, titled ‘Labour markets in a world of continuous change’, can be viewed at www.hays-index.com.
Hong Kong has been given the highest score possible – 10.0 – for overall wage pressure in a global assessment of the efficiency of skilled labour markets in 31 countries.
The Hays Global Skills Index, produced in collaboration with Oxford Economics and released today, scores Hong Kong’s labour market against seven indicators, or points of potential pressure. For each indicator Hong Kong received a score out of 10. A score close to 0 indicates little to no pressure, while a score close to 10 shows severe pressure.
The Index shows that in Hong Kong, pressure on our labour market comes from three of these indicators. The first is ‘overall wage pressure’, which measures whether wages are keeping pace with historic trends and for which Hong Kong received the highest possible score of 10.0 for the second consecutive year. This shows that wages are increasing much quicker than we have historically seen.
“This supports what we’re seeing on the ground, namely overall labour market tightness as employers compete for talent based on salary,” says Dean Stallard, Regional Director of Hays in Hong Kong. “It also shows that further salary increases will likely do little to alleviate the skill shortage.
“With our open business environment, low tax rates, world-class infrastructure and close proximity to China, many multinational companies use Hong Kong as their Asian base. Although Hong Kong does have some reliance on trade flowing in and out of mainland China, it has also become the go-to location for companies to set up their global procurement hubs for sourcing throughout China and Southeast Asia.
“Add the launch of the Shanghai-Hong Kong Stock Connect and the Territory’s position as a leading global financial centre, and it’s no wonder the labour market is pressured. This, along with the high cost of living, explains why we received the highest score possible for overall wage pressure for the second consecutive year,” he said.
The second indicator or pressure point is ‘wage pressure in high-skill industries’, which measures the rate at which wages in high-skill industries outpace those in low-skill industries. Hong Kong received a score of 6.2, which shows that wages in high-skill industries are rising much quicker than those in low-skill industries relative to the past.
“Some industries like engineering, technology and life sciences for example, require higher-skilled staff than other industries,” says Dean. “As it takes time to undertake the training necessary to work in those industries, it potentially makes them more vulnerable to skill shortages as the number of people qualified to start work cannot be changed quickly.
“Hong Kong’s score of 6.2 is up over one full point from 5.1 last year, which shows that industry-specific skill shortages are becoming more acute.”
The third indicator or pressure point is ‘labour market participation’, for which Hong Kong received a moderately high score of 6.1. This indicator measures the degree to which Hong Kong’s talent pool is fully utilised.
“Bringing more people into the workforce is a powerful way to improve economic and labour market performance,” says Dean. “But pressure comes because most of our labour force is already utilised and therefore the available talent pool can’t be increased in great numbers – so we can’t relieve the skill shortage by raising the participation rate.
“With a positive forward economic outlook, both vacancy activity and candidate demand will intensify further and employers must innovate to attract top talent,” he said.
For the remaining four indicators, the Hays Global Skills Index ranked Hong Kong fairly positively. The education system is very well equipped to meet future talent needs (Hong Kong received 1.8 for ‘education flexibility’), the labour market legislation is fairly flexible (2.4 for ‘labour market flexibility’) and candidates usually possess the skills employers are looking for (4.9 for ‘talent mismatch’). These are all positives for Hong Kong’s labour market since they indicate low pressure points.
Interestingly, while Hong Kong received a high score for ‘wage pressure in high-skill industries’, it received the lowest score possible of 0.0 for the last indicator of ‘wage pressure in high-skill occupations’.
As Dean explains, “Some occupations require a higher than average amount of training and education. These are called high-skilled occupations. This indicator measures if there is a wage premium for such highly-skilled professionals. We received a score of zero, which suggests that wages for highly-skilled candidates (such as managers, senior officials or skilled trades) are rising slower than for low-skilled candidates (such as process, plant and machine operatives, and administration workers).”