Hong Kong has a labour shortage? At what price?
Hong Kong Free Press
During what I now think of as a fallow period between university and journalism I lived in Lancaster, and several of my fellow drop-outs worked at the docks in the nearby town of Heysham
The port at Heysham is very small, and in those days still worked on a recruitment system which the big docks had recently abandoned. Every morning, would-be workers would gather at the gate, and at 9am the boss would emerge and choose their team for the day. This was known technically as the “casual” system.
Effectively you were hired – or not as the case may be – on a daily basis. This system had been defended for years as necessary because of the wild fluctuations in the amount of work to be done on any one day, depending on the number of ships, types of cargo, state of tides and so on.
Even its defenders conceded that the arrangement had many disadvantages for both sides. For the workers it meant a permanent state of insecurity, with those unfavoured by the selector left to struggle to assemble a wage they could live on.
From the employers’ point of view, the workers could not be expected to display any enthusiasm or commitment to the work. They had an incentive to make it last as long as possible and could not be prevented from pilfering vigorously from the cargoes in their care.
Large docks were neither efficient nor clear of corruption. When my father collected a consignment from the docks in London, he used to take with him a bag of half crowns – the most valuable coin then available, worth maybe HK$20 in modern money – to grease the various palms which would be held out on the way to his crate.
So, it was a bad system which the employers eventually abandoned, ironically just before the arrival of containerisation made all the traditional docks obsolete, putting both the employers and dockers out of business.
The norm, at least for a while, became less carnivorous. Employment might be ill-paid or unpleasant but it was at least expected to be reasonably secure. Victories of this kind are always temporary. There is a permanent clash of interests between employers, who want to adjust their workforce constantly, and employees, who want job security so that they can plan for the future.
It seems to me that the casual arrangement is now making a come-back, although we don’t call it that. “Zero-hours contracts” mean that workers do not know from day to day whether their services are required. Delivery and taxi apps which pay by the job mean that drivers are effectively unemployed whenever work is scarce.
A similar economy has now been discovered by local universities, which recruit many teachers on a one-term-at-a-time basis. This means the hapless teacher has no idea whether they have any long-term prospects, and in the meantime does not get paid at all in non-teaching weeks, of which there are quite a lot.
Attitudes to “down-sizing” – or whichever euphemism for mass sackings you prefer – vary from place to place. In America it is seen as a sign of corporate machismo, commonly saluted by a rise in the relevant share price. In Japan, at the other extreme, it is regarded as shameful and large employers don’t do it at all.
The Covid outbreak presented an interesting dilemma for employers. Did one, at some expense, try to preserve a relationship with the staff you would need when the epidemic subsided? Or did you panic, sack everyone and leave the future to fend for itself?
Reports from the UK and US suggest that most employers panicked, with some notable exceptions. Ryanair is an outstandingly cheap airline famous for its brusque treatment of its passengers. But in the epidemic it stood by its staff, while providing a lot of unpaid leave, and as a result was able to get back up and running while competitors were complaining that they needed months to train new people.
And this brings us to Hong Kong, where those lucky local employers who grind the faces of the poor, water the workers’ beer and employ many of us are lavishly represented in our new politics-free Legislative Council (LegCo).
It is a curiosity of local journalism that publications which have stopped court reporting, even of the “trial of the century,” are happy to devote column inches – indeed column feet – to entirely meaningless debates in LegCo.
So last week we were treated to a string of complaints about the “labour shortage”. Some speakers were tactless enough to blame this on the “emigration wave”, which I thought we were not supposed to be talking about. Others blamed the aging population, though it is difficult to believe that the population has aged that much in two or three years.
Strictly speaking there can be no such thing as a labour shortage, because the inexorable laws of supply and demand, so beloved of businessmen when they want to be left alone, will solve shortages automatically. The price of items in demand will rise, curbing the demand, until the market “clears”, at least in theory, with a price satisfactory to the surviving buyers and sellers.
At the level of the firm we all understand how this works. If you are having trouble hiring winkle-pickers the only recourse is to offer higher pay. Aging winkle-pickers will postpone their retirement; middle-aged ladies who left their jobs to raise babies will return to the workforce; restless young men will abandon plans to join the French Foreign Legion, and your workforce will expand.
Of course we must not suppose that economic theory is always on the side of higher wages. You may decide that the best course is to mechanise the whole operation and import a winkle-picking machine from Dusseldorf – or the less effective but much cheaper intellectual property violation from nearer to home – which will reduce your labour requirements to a few machine minders.
The general rule, though, is that industries which are short of labour are not paying the market rate. But our business councillors were of one mind: the solution to their problem was for the government to import labour.
Scottish philosopher and economist Adam Smith wrote: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” He should perhaps have added that some contrivance to lower wages was also a popular topic.
What nobody in LegCo pointed out was that the employers who are now complaining about a shortage of labour had every opportunity, during the last couple of years, to prepare for life after Covid. Neither the aging population nor the emigration wave are recent developments.
Now they are surprised: they walk out of the dockyard gate and there is nobody there. This was entirely predictable. The government is being asked to rescue foolish virgins from the consequences of their folly.
Not to worry. Secretary for Labour and Welfare Chris Sun promised that the government would “allow imported workers to be introduced moderately,” which seems to leave him a lot of room for manoeuvre. This will put the government in the interesting position of importing workers at the same time as it is urging young Hongkongers to explore the exciting opportunities north of the boundary. Are our opportunities not exciting enough?
A last word from Smith: “Our merchants and masters complain much of the bad effects of high wages in raising the price and lessening the sale of goods. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”
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