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Labour force growth will slow down: report

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Macau’s labour force has experienced the strongest growth in the East Asia region during the last decade. But an international report warns authorities to prepare for a demographic challenge caused by a fast ageing population.
Since 2001 the local working-age population has increased by a yearly average of 4.2 percent, jumping from a little over 200,000 to reach 347,000 at the end of last year.
This growth was much faster than in neighbouring countries and territories such as Mongolia (2.2 percent), mainland China (0.9 percent) or Hong Kong (0.8 percent), according to the ‘Global Employment Trends 2012’.
Macau’s labour force will continue increasing in the next decade but at a much slower pace, the International Labour Organisation (ILO) report stresses. Yearly average growth is expected to drop to less than half, 1.8 percent.
If this forecast, released last month, is accurate then the population fit to work would increase by just 60,000 to hit 407,400 by 2020. The reason for this slowdown is a rapidly ageing population, ILO wrote.
Currently the MSAR has the second best demographic profile in the world, only behind Qatar. Working-age adults now account for 80.8 percent of the total population, up from 71.1 percent a decade ago.
But a big part of the population (64,400 people) is now aged between 55 and 64 years old. And Macau’s birth rate, even though it could rebound during the Lunar Year of the Dragon, remains too low to balance the number of people nearing retirement.

‘Improve the management of labour migration regimes to help address labour shortages, while ensuring full protection of the rights of migrants’

Changes coming

“To the extent that current difficulties in the world economy are short-lived, this will bring about a demographic dividend as younger cohorts can benefit from vastly larger capital equipment, driving up labour productivity and wages,” the report says.
“This dividend should help countries in the region to prepare for increased public and private costs of taking care of the elderly before the old-age dependency ratio is set to increase sharply,” it added.
By 2050 there will be eight non-working residents – children and elderly – for every 10 active workers in Macau, according to another ILO prediction. A report released in December 2010 warns that the working population and the social security system will face a greater burden mainly to support a growing number of seniors.
The increase in the number of immigrants and non-resident workers has so far been able to balance the workforce. At the end of December the number of imported staff had reached a three-year high of 94,000.
ILO called on all East Asian governments to “improve the management of labour migration regimes to help address labour shortages, while ensuring full protection of the rights of migrants”.
In the case of Macau the organisation has before criticised the six-month ban for non-resident workers who terminate their contract without just cause as “a case of discrimination”.
In addition, a local legal expert has warned that the social security system, which excludes migrant workers from its scope of benefits, is discriminatory and goes against the Basic Law.

A slowdown in labour force growth ‘will bring about a demographic dividend as younger cohorts can benefit from vastly larger capital equipment, driving up labour productivity and wages’

Social protection

Authorities should also “develop fiscally sustainable social protection systems,” ILO said, while praising China’s “significant progress in strengthening its healthcare system and access in rural areas”.
The recently created Social Security Fund will be sustainable for at least 50 years, president Fung Ping Kuen said in 2010. However, he warned that the current MOP 45 contribution is “far too small” as the benefits “are a lot higher than resident contributions”.
And experts agreed that a model that promises a retirement pension of MOP 2,000 for a contribution of just MOP 45 is not sustainable in the long term.
Considering that residents have to contribute for a minimum of 30 years, this figure would only be enough for a monthly pension of MOP 210 for 15 years, Chu Shun Ho, professor of Finance at the Macau University of Science and Technology, told Macau Daily Times.
The government should gradually raise the contribution for both workers and employers, they stressed last November, because it’s dangerous to expect that the gaming industry will keep booming and providing the tax revenue to cover the social security system’s gaps.

Last year Chief Executive Fernando Chui Sai On said the MOP 45 contribution would be raised in 2012, without providing any numbers. But even to double the contribution might hardly improve the situation, experts warned.
The Social Security Fund already spends more than 80 percent of its budget on retirement pensions and the load “will keep on increasing” as the local population ages, said Ricardo Siu Chi Sen, Business Economics professor at the University of Macau.

‘Create the right incentives for increasing labour force participation among women, as well as among older workers through delayed retirement schemes’

Working women

Moreover, East Asian governments should “create the right incentives for increasing labour force participation among women, as well as among older workers through delayed retirement schemes,” the report says.
“This should include policies to eliminate workplace discrimination and to ensure equal remuneration for equal work,” ILO emphasised. Another priority should be to “nurture life-long learning,” it added.
At the end of December about 68 percent of all women between 16 and 65 years old in Macau were working, the highest percentage in the region. However there are more women (72,200) among the lowest paying jobs in Macau – monthly salary below 8,000 – than men (44,900).
Finally, the ILO also believe it’s necessary to “accelerate labour productivity growth in order to counterbalance projected low employment and workforce growth rates”. But the report admits “this will be a difficult challenge as labour productivity growth in the region was already an impressive 8.7 percent in 2010”.
Authorities should “encourage enterprises to adopt progressive workplace practices and innovative technologies and to move up in regional and global production chains,” the organisation wrote.
Asked by Macau Daily Times if it would consider whether or not to introduce any of the measures proposed by ILO, the Labour Affairs Bureau (DSAL) downplayed the document.
“We have noticed this report and also noted that the statistics are followed by a simple analysis. We would like to assure that the authority, as usual, will continue to keep close attention on the local job market and will establish proper policy to protect the employment of local residents whenever necessary,” a DSAL spokesperson replied.

‘Accelerate labour productivity growth in order to counterbalance projected low employment and workforce growth rates’


Job market positive so far

So far the employment situation in Macau is very positive, the International Labour Organisation (ILO) conceded. “Strong economic growth has continued to fuel employment growth,” it wrote in a report, and in no other country or territory has this link been more obvious than in the MSAR.
During 2011, with the economy growing by over 20 percent for the second consecutive year, employment grew by 5.5 percent – the fastest pace in the East Asia region, ‘Global Employment Trends 2012’ stressed.
As a result the jobless rate dropped to just 2.1 percent at the end of December – the lowest in 18 years.
In fact, if included in a list of countries published by Trading Economics website, Macau would rank fourth worldwide in unemployment rate, just behind oil-rich Qatar (0.6 percent) and two regional rivals, Thailand (0.7 percent) and Singapore (two percent).
But it’s not all good news, the report released last month stresses, as the unemployment rate among the youth remained high in 2011, particularly for young men. The youth unemployment rate in Macau reached 6.5 percent in the three months ended October, much higher than the rate for the overall population.
And this is a regional phenomenon, ILO wrote. “As such, young jobseekers [in East Asia] were 2.7 times more likely than their adult counterparts to be unemployed,” the organisation warned.

Inflation concern

One factor behind this trend is a slowdown in the manufacturing sector, which reached its peak in the territory. “In line with weak manufacturing production, manufacturing employment in Macau continued to decline at a rapid pace, falling by 15.6 percent,” the report emphasised.
The once dominant textile manufacturing sector continues to lose importance after the end of the textile quotas for the territory in 2005 and its exports declined by 17.7 percent to just MOP 1.34 billion last year. In 2010 the contribution of the manufacturing industry dropped to less than two percent, a far cry from the 10.1 percent registered in 2000.
Finally, ILO also warned that “high consumer price inflation in much of East Asia was a significant concern for policy-makers” during last year. In Macau, inflation reached 6.8 percent in December, a three-year-high.
And analysts expect inflation to remain a problem during this year. “With the economy still growing and domestic consumption on the rise, we expect inflation to stay at a relatively high level, in a range of four to five percent,” the chairman of the Macau Association of Economic Sciences, Joey Lao Chi Ngai told Macau Daily Times last week.
These fears merely increased when mainland China, Macau’s main supply market, reported an annual inflation rate of 4.5 percent in January after consumers splashed out on food and gifts over the Lunar New Year holiday.
It was the highest level in three months, thus ending five straight months of easing price pressures caused by restrictions imposed by the Central Government on lending and property purchases.




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