As the financial hub emerges from the Covid-19 pandemic, the city finds that it’s facing a similar labour market divergence as the US: A white-collar recession and a blue-collar boom.
Wall Street banks are just getting started with layoffs, trigged by a rethink of their China strategy, a decade of over-hiring and a lack of trading and dealmaking activities. Morgan Stanley, for one, is considering a 7% cut in its investment banking division across Asia. Those with China focus will take the biggest hit, according to Bloomberg News.
Jobs that do not require a college education, on the other hand, are in high demand. Hong Kong is set to bring in about 20,000 workers, mostly from the mainland, to ease a labour crunch. The construction sector lacks 14,000 people this year, a mismatch that is expected to widen to 40,000 by 2027. Without imported labour, by next year we would see “considerable shortage” in specialised roles such as false-ceiling installation, paving block layering, scaffolding and welding, according to a recent forecast by the city’s Construction Industry Council.
It’s not just job security; there are concerns about pay, too. While bankers moan about deep bonus cuts, blue-collar jobs are seeing big raises.
Last year, some construction workers got 12.5% boost. Certain roles, such as bar bending and fixing, can get HK$2,600 (RM1,529) per day, according to the industry trade union. Financiers who spend hours at the gym lifting weights could perhaps try moonlighting at building sites instead?
Since the collapse of Lehman Brothers in late 2008, the city, which serves as the gateway to mainland China, has blossomed. Finance contributed to 22% of Hong Kong’s GDP last year, from 13% pre-crisis. The industry is also hiring hundreds of thousands more people, promising upward social mobility that outshines all other sectors.
But perhaps out of complacency, Hong Kong’s infrastructure has not kept up. Over the last decade, public spending on repair and maintenance work has been practically stagnant.
With a heat wave hitting the city in recent days, the decay in Central, the world’s most expensive office district, and the adjacent mid-levels that are peppered with fine restaurants, is striking. The air smells like sewage, potholes are hastily filled and broken pedestrian steps are not fixed. It makes you wonder why a 300 sq ft apartment can go for more than US$1 million (RM4.61 million) in this neighbourhood, while office landlords charge on average HK$977 per sq m.
As such, this rebalancing will continue. With a slowing China and the arrival of generative AI, Hong Kong’s finance industry will have to go through deep capacity cuts.
Meanwhile, blue-collar workers, hardest hit during the pandemic, are seeing resilience and even an improvement in their cashflow as the city plays catch-up with its public services. Construction industry aside, new cabin crew hires at Cathay Pacific Airways Ltd are also getting a pay increase as the city’s flagship carrier races to retain employees.
For years, the government has been worried about wealth inequality and the potential social unrest that may arise. As a possible fix, Chief Executive John Lee is keen to build social housing for the poor. During his maiden policy address last year, he vowed to cut the waiting time for public housing from six years to 4.5 by 2027.
This recent labour market trend, which is an unusual departure from previous downturns, may give Lee some breathing room to figure out how to make Hong Kong a prosperous city for all, not just for investment bankers and hedge fund managers. A white-collar recession will help level Hong Kong’s playing field. — Bloomberg
- This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
- This article first appeared in The Malaysian Reserve weekly print edition