Amid the ongoing impact of the Covid-19 pandemic, talk of a “brain drain” is adding to the pressure on Hong Kong companies. It is certainly a major concern for Chamber members: in our Business Prospects Survey released in December, the loss of talent overtook restrictive social-distancing measures to become the second biggest impediment facing businesses.
It is hard to know for sure how serious the problem is, as the Government does not keep records of people emigrating. We do know that the city’s population fell 1.2% to 7.39 million in the year ending June 2021. And the 2021 autumn term got under way with a year-on-year drop of 5.9% in primary school enrollment and 3.8% in secondary schools.
It is likely that at least some of this is down to the pandemic – in particular Hong Kong’s harsh travel restrictions – interrupting the normal ebb and flow of people. Edward Moncreiffe, Chairman of the Hong Kong Federation of Insurers, said this is a major concern for Hong Kong businesses.
“The key pain point right now is quarantine,” he said. “We are very worried about international staff, and also the internationally minded – people who have been educated abroad, who have relatives living abroad or children in school.”
He noted that while business activity can carry on, there is also the human cost of people not being able to see their families and friends. If the Government does not communicate a pathway out of the current quarantine restrictions, the number of people leaving could increase.
“I am worried that we could see an exodus at the end of the school year, in the summer.”
CK Lee, Chairman of the Chamber’s Manpower Committee and Managing Director of CK Lee & Associates, believes that the current exodus is not just down to the pandemic. He said that his clients and fellow manpower professionals have noted an increase of professionals leaving Hong Kong in search of opportunities elsewhere.
“The people who are leaving tend to be in their 30s and 40s – they may be line managers or project managers with 10 to 15 years of experience,” Lee said. “If these people are migrating with their families, this is a great loss for businesses – for the succession pipeline and running of the day-to-day operations.”
This age group often have young families, and therefore is more likely to put roots down outside of Hong Kong and less likely to return. In terms of sectors, IT and technology experts are leading the way, as their skills are in high demand around the world, Lee said.
Jeff Tang, Partner, People Advisory Services, Financial Services Leader, Greater China and ASEAN at EY, said that Hong Kong has always been a transient place, and we have long benefited from the skills of workers from around the world. So while people leaving the city is fairly normal, however, the inward flow has been interrupted recently.
“In terms of attracting new talent to Hong Kong, this is getting more difficult for businesses,” he said.
In particular, the flow of overseas-born Chinese has slowed. This group are particularly needed in Hong Kong as they tend to have spoken Cantonese as well as English.
Tang added that Hong Kong had always attracted top students from the Mainland, but we won’t know until the situation returns to relative normality whether they will come back.
“So we are at an inflection point,” he said, “where some people are leaving, but it is harder to get an infusion of new blood.”
Many economies around the world are suffering from an acute shortage of workers at present. The phrase, “The Great Resignation” was coined in response to the situation in the United States in 2021, as soaring numbers of workers handed in their notice.
The EY Work Reimagined Employee Survey 2021, which covers 16,000 people in 16 jurisdictions, highlights that this is a global issue. Of employees that responded to the survey, 54% of them said that they would be willing to quit if they were not offered the flexibility they wanted.
This is not just an empty threat. Jason Seng, Partner, People Advisory Services - Workforce Advisory at EY said that businesses across ASEAN had reported an exodus of talent.
For companies that want to hold on to their best staff, flexibility is now the number one priority for workers.
“Employees that have been forced to work from home during the pandemic are now demanding a certain level of flexibility,” Seng explained.
“When you drill into this, flexibility about when they work is more important than where,” he said. “Flexibility on start and finish times was top of the list, followed by options for compressed hours or a four-day work week.”
In terms of location, the global trend is towards a hybrid system, with workers preferring to work remotely around half of the time, on average.
Businesses could also do better in communicating with their staff about how they plan to deal with the Covid-19 situation and flexible working in the future. The EY survey shows that employees are very clear-sighted about their expectations, but this is not the case for employers. Some companies have still not made decisions on how the workplace will operate post-pandemic, while others have not yet shared their plans with employees – creating uncertainty and frustration for staff.
Tang from EY said that to deal with the manpower issues, Hong Kong businesses need to think more about the future – “strategic workforce planning” in HR parlance.
He said that the traditional thinking in Hong Kong has often been to solve problems by spending more money. But this approach will not work when there is simply not enough talent with the skills needed.
Even in traditional businesses, functions like finance and HR are evolving and require new skillsets.
“Businesses need to plan ahead to see what skills will be needed five years down the road,” he said. “We need to see if we have the skills available in our organization, and if not, how can we reskill people.”
At the same time, some citizens have lost their jobs since the pandemic, particularly in the retail and tourism sectors. Tang said that there is a role for the Government in helping to address this imbalance through targeted reskilling programmes.
High-tech to construction
Manpower shortages are nothing new for Hong Kong as it faces an ageing population and a shortage of tech talent, but we are now facing competition from many more cities.
“The global race for talent is a phenomenon that is happening everywhere, and the competition is intensifying,” said KC Kwok, CEO at the Hong Kong Academy of Finance, speaking at a recent Chamber seminar.
He noted that many Mainland cities have successfully rolled out policies to encourage overseas Chinese to return home after working or studying overseas. A similar approach here would make Hong Kong more competitive, including incentives to encourage overseas students to stay after graduating.
Another issue for Hong Kong is that our workforce has not kept up with the evolution of technology. To deal with this, we need to train and retain people on a large scale, Kwok said. This includes our crucial finance industry, which needs talent with expertise in areas including AI, big data, green finance and fintech if we are to remain competitive.
Manpower challenges do not just affect technology and other white-collar professions. As CK Lee pointed out, sectors like construction have long suffered from an acute shortage of workers.
“Hong Kong has some huge plans for development coming up in the next 10 years: where will we get the workers and the foremen for this construction work?” he said. “And with Hong Kong’s ageing population, we need more care workers for the elderly.”
Lee noted that the Chamber’s Manpower Committee has been advocating for more importation of labour – in a targeted manner – to deal with these specific issues.
He also pointed out that Hong Kong had thrived throughout its history thanks to the contribution of migrant workers. “Hong Kong has always been an international city,” he said. Indeed, many citizens today have parents or grandparents who came to Hong Kong from the Mainland, and also from Chinese communities across Asia.
Hong Kong lifestyle
Hong Kong has many attractions as a place to live, but the biggest drawback is the extremely high cost of housing. An ECA International report released in December put Hong Kong at the top of the rankings as the most expensive city in the world for expats.
“From a practical angle, the cost of living is high,” said Kwok from the Hong Kong Academy of Finance. “The talent that Hong Kong needs is people in their 30s and 40s, who often have children. Hong Kong is not an attractive place for families from overseas who are accustomed to much more living space.”
Looking to the longer term, the Northern Metropolis and Lantau Tomorrow development proposals may ease this issue by creating more physical space for Hong Kong and ultimately making it a more affordable city.
But while local businesses are rightly concerned about an outflow of talent, it is worth bearing in mind that this is a worldwide issue and is probably being driven at least in part by the temporary impact of the pandemic.
Taking a broader view, Hong Kong is actually doing well in terms of our attractiveness as a location to work and having a skilled workforce. According to the IMD World Talent Ranking 2021, released in December, Hong Kong is ranked at number 11 globally, up three places from the previous year – and at number 1 in Asia.
Drilling down into the detail, Hong Kong ranks particularly highly on finance skills, international experience and remuneration of management. These attributes will still be there, along with Hong Kong’s many other advantages as a place to live, work and do business when the threat of Covid-19 finally eases.