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Friday, Jul 01, 2022

Doing right by foreign workers will sustain Hong Kong’s competitive edge

Doing right by foreign workers will sustain Hong Kong’s competitive edge

Foreign domestic workers are an often-overlooked part of Hong Kong, and they are struggling amid the city’s push for ‘zero Covid’. Flight bans, a shortage of quarantine hotels and other difficulties are hurting thousands of families in both Hong Kong and the Philippines.

In recent decades, Hong Kong’s competitive advantage has been built upon diverse foundations. Some are obvious and repeated ad nauseam – low and simple tax rates, trusted legal system, unique access to the mainland and so on. But some are noticed less often and taken for granted until Covid-19 struck, such as our army of foreign domestic workers.

They make up more than 9 per cent of our workforce and provide support in at least 275,000 Hong Kong homes. Paid a pittance and often working long hours in claustrophobic circumstances, they make it possible for tens of thousands of Hong Kong mothers to pursue meaningful, well-paid careers, strengthening our local skills pool for the thousands of international companies based here.

It has enabled Hong Kong to achieve a 54 per cent female workforce participation rate. That is behind Singapore, but on a par with Japan and well ahead of the global average of around 47 per cent.

In recent years, an increasing number of domestic workers have also come to care for Hong Kong’s elderly and infirm, enabling them to age at home and stay out of expensive elderly care homes. But Hong Kong’s strict “zero Covid” strategy has turned this formerly well-oiled system topsy-turvy.

The ban on flights from the Philippines – the source of many of Hong Kong’s helpers – has left thousands of helpers stuck in the Philippines. Whether they were back home on leave or waiting for flights to start new contracts, they are now stranded and will remain that way until flights are resumed. Even when flights start afresh, they face two weeks of quarantine. A shortage of quarantine hotel rooms makes even this process uncertain.

The disruption has left thousands of Hong Kong families without home help and has sparked a price war over helpers that are already here in Hong Kong. With a shortfall of an estimated 50,000 helpers, accusations of “job-hopping” have flared. Anecdotal accounts report families offering monthly salaries of HK$6,000 (US$770) and more to poach helpers who are in normal times earning just HK$4,630 a month.

While the disruption in Hong Kong is severe and still unresolved, the disruption in the Philippines itself could be greater. That is because of the country’s reliance on its bagong bayani, or heroes, as the country’s army of overseas workers are called.

According to the Philippine Overseas Employment Administration, around 2.2 million Filipinos work overseas. Around 12 per cent of Filipino families rely on remittances from at least one bagong bayani.

Remittances in 2019 – the last “normal” year before Covid-19 struck – amounted to about US$33.5 billion, equivalent to about 10 per cent of the country’s GDP. At a time when unemployment inside the Philippines is 6.5 per cent, reliance on remittances in many areas is critical.

This puts the Philippines among the leading countries that receive overseas worker remittances, behind India, China and Mexico. Because its economy is so much smaller than the leading three, its economic reliance on remittances is without parallel.

The economic turbulence arising from the global pandemic has sent alarms ringing through the corridors of power in Manila and through millions of families. Hong Kong thankfully appears to be an outlier, though, and remittances overall have remained more resilient than expected.

Against predictions during the direst months in the middle of 2020 that remittances might fall by 13 per cent or more, figures from the Philippines central bank at the end of 2021 suggest a life-saving recovery since the nadir in 2020. They now predict a fall of just 0.8 per cent.

Why is this? First, Hong Kong is an insignificant outlier. It accounts for just 7 per cent of all Filipino overseas workers, compared with more than 20 per cent working in Saudi Arabia, 13 per cent in the United Arab Emirates and almost 220,000 seafarers who staff the world’s merchant ships and cruise ships.

A worker arranges fish in a supermarket in Uptown Bonificio shopping mall in Taguig City, Metro Manila, the Philippines, on January 26. Around 2.2 million Filipinos work overseas, and around 12 per cent of Filipino families rely on remittances from at least one bagong bayani.

Also, because Hong Kong’s domestic workers are almost all young women from abroad, they are among the city’s least-well-paid overseas workers. Those in the Middle East are more likely to be male and thus more likely to fill managerial or professional roles where pay is much better.

Despite Covid-related upheavals in Saudi Arabia and the UAE, where there were reports of large numbers of early terminations of foreign workers in 2020, there appears to have been a strong recovery since then. Most significant of all has been a rise in remittances from the United States, where the large community of Filipino emigrants appears to have responded powerfully to calls for help from relatives back home.

As a World Bank blog noted last November: “It is remarkable to see the recovery in remittance flows in 2021, proving again their reliability as an absolute lifeline for families of migrants back home, especially in times of need.”

For now, families back in the Philippines have found some relief. Whether this can be sustained is another matter. Unemployment within the country remains high. Many of the stranded overseas workers can find no work at home and see no early prospect of returning to their jobs overseas or on cruise ships.

The upheavals here in Hong Kong need to be resolved as speedily as possible, not just for the sake of thousands of families in the Philippines but for thousands of families here in Hong Kong. And there is that other, not-insignificant matter of maintaining an essential competitive advantage that has for decades been largely ignored.


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