With Hong Kong’s unemployment rate holding steady at 3.5 percent in April-June, and projections suggesting a rise in the second half because of new graduates and sectoral slowdowns, a critical question emerges: Does the city still need to import laborers? Rising joblessness in the construction, retail, and food and beverage (F&B) sectors has sparked debate over the Enhanced Supplementary Labour Scheme (ESLS), with union leaders warning it threatens local job security. The fundamental challenge lies in employers’ inability to attract local candidates, compounded by a skills mismatch and waning interest in these sectors among young people. Can Hong Kong produce talent that meets employer demands while creating jobs that inspire its workforce?
Indeed, Hong Kong’s construction and F&B sectors face rising unemployment, reflecting deeper structural challenges amid the city’s economic transition. Although the ESLS for the construction sector only applies to government-funded capital works projects, local employment is still affected by a slowdown in the private sector. Facing a record-high inventory of unsold residential units, developers — prioritizing the offloading of existing stock — have scaled back new projects, reducing demand for construction workers. The unemployment rate of the F&B sector stems from the closure of various household brands, along with shifting consumer spending habits, as more residents shop and dine across the border on the Chinese mainland, drawn by lower costs, more variety and more attentive customer services.
Hong Kong’s construction and F&B sectors, navigating a period of transition as noted by Secretary for Labour and Welfare Chris Sun Yuk-han, are showing signs of recovery, driven by strategic government initiatives. In construction, an expanded budget for capital works, coupled with a stabilizing private residential market, underpinned by lower interest rates, surging transactions, and rising demand from incoming talent and students, signals there is light at the end of the tunnel. For F&B, government efforts to boost tourism and host mega events are revitalizing the sector. The challenge now is with the F&B operators to come up with products and services that can attract the patronage of potential customers. Furthermore, in response to the changing demographics where more families are dog owners, the government is exploring the feasibility of relaxing the 30-year-old ban on pet dogs in restaurants, a move that could unlock spending from 400,000 dog owners — a market constrained by cross-border travel restrictions. These developments, if sustained, could create jobs and mitigate unemployment, provided employers address local workforce engagement and skills gaps.
The question remains, should ESLS stay?
Introduced in September 2023, the ESLS allows employers to import workers for publicly funded projects and other roles after proving local recruitment failures. As of May, the program approved 9,056 workers for construction and 4,162 for aviation, with 1,494 drivers deployed in public transport. Safeguards, strengthened on June 17, include a 2 to 1 local-to-imported worker ratio, median wage requirements, and an online complaint portal to address wage suppression or displacement concerns.
Critics argue that importation programs reduce local job opportunities, particularly in a weak market. A labor union representative said, “We have heard cases where employers ask full-time local employees to become part-time, yet the same employer is importing labor from the mainland.” Employers, however, counter that importation is costly. “We don’t want to import labor as the cost is actually higher if you include accommodation and levies,” says one employer. The government reported that importation has “contributed very little” to unemployment, pointing to structural issues like private sector slowdowns and technology adoption.
Instead of debating whether ESLS should stay, it’s perhaps a good idea to look at what Singapore is doing. Its S Pass and Work Permit programs, capped at 60 percent of a company’s workforce in manufacturing, balance labor needs with local employment through quotas and levies. Singapore recently raised costs for hiring foreign workers to prioritize locals, a model Hong Kong can consider. Unlike Hong Kong’s case-by-case ESLS approvals, Singapore’s streamlined online application process (often within three weeks) enhances efficiency, though it faces similar concerns about overreliance on imported labor.
To secure Hong Kong’s economic edge, stakeholders — government, employers and educators— must collaborate to upskill the workforce, align education with market demands, and foster jobs that inspire local talent. By integrating global best practices, Hong Kong can transform its labor market challenges into opportunities for sustainable growth
To reduce dependence on the ESLS, Hong Kong must tackle structural workforce challenges beyond importation policies. The gig economy’s rise, with employers potentially fragmenting full-time roles into unregulated platform-based tasks, risks evading Employment Ordinance protections and complicating enforcement. The solution lies in aligning the workforce with employer needs through robust upskilling. Promoting lifelong learning via flexible, localized micro-credentials, offered through the Continuing Education Fund (CEF) and Employees Retraining Board, is essential. Expanding CEF eligibility to include platforms like LinkedIn Learning and Coursera, alongside family-shared access and online course options, could significantly boost uptake, address the skills mismatch, and enhance economic competitiveness.
The ongoing review of the ESLS is pivotal for balancing immediate manpower needs with long-term local employment priorities. While the ESLS effectively addresses sectoral shortages, its efficacy hinges on robust data regarding wage impacts and hiring trends, alongside stronger oversight of gig economy practices. To secure Hong Kong’s economic edge, stakeholders — government, employers and educators— must collaborate to upskill the workforce, align education with market demands, and foster jobs that inspire local talent. By integrating global best practices, Hong Kong can transform its labor market challenges into opportunities for sustainable growth.
The author is a senior lecturer in the Department of Marketing, the Hang Seng University of Hong Kong.
The views do not necessarily reflect those of China Daily.
