Hong Kong has been given a score of 10 out of 10 for “overall wage pressure” in the Hays Global Skills Index, showing that wages are increasing much quicker than we have historically seen.
The Index, produced in collaboration with Oxford Economics, assessed the efficiency of skilled labour markets by seven indicators in 31 countries. A higher score indicates more severe pressure on the labour market.
Hong Kong has received high scores in three of the indicators. The first one, “overall wage pressure”, for which Hong Kong has received the highest possible score of 10.0 for the second consecutive year, measures whether wages are keeping pace with historic trends. The highest score reflects overall tightness in the Hong Kong labour market and fierce competition among employers for talent based on salary. It also shows that further salary increases will do little to help alleviate the skill shortage. The severe pressure on the labour market may be explained by Hong Kong’s position as a leading global financial centre, the recent launch of the Shanghai-Hong Kong Stock Connect and the high cost of living in the Territory.
The second indicator is “wage pressure in high-skill industries”, for which Hong Kong received a score of 6.2. It indicates that wages in high-skill industries are rising in a much faster pace than those in low-skill industries relative to the past, and that industry-specific skill shortages are becoming more acute. This might appear in industries like engineering, technology and life sciences, which require higher-skilled staff and take more time to undertake necessary training than other industries.
The third indicator, “labour market participation”, for which Hong Kong is given a score of 6.1, measures the degree to which the market’s talent pool is fully utilised. The moderately high score indicates that most of the labour force in Hong Kong is already utilised and the available talent pool can’t be increased in great numbers, leading to skill shortage. The situation could become worse if economy improves and that both vacancy activity and candidate demand intensify further.
The remaining four indicators show fairly low pressure points for Hong Kong’s labour market. It is given 1.8 for “education flexibility”, meaning our education system is very well equipped to meet future talent needs; 2.4 for “labour market flexibility”, meaning our labour market legislation is fairly flexible; and 4.9 for “talent mismatch”, meaning candidates usually possess the skills employers are looking for.
Interestingly, while Hong Kong is given a high score for “wage pressure in high-skill industries”, it received a score of 0.0 for the last indicator of “wage pressure in high-skill occupations”, which measures if there is a wage premium for highly-skilled professionals. This suggests that wages for such candidates (like managers, senior officials or skilled trades) are rising slower than those for lower-skilled candidates (like process, plant and machines operatives, and administration workers).
The Hays Global Skills Index report, titled “Labour markets in a world of continuous change”, can be viewed at www.hays-index.com.
This article was originally published on Hays.