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Global Economics

Coping with China's Worker Shortage

Pollution and poor infrastructure impact companies doing business across the country, but perhaps the biggest challenge is filling jobs

Greater China is in the midst of an unprecedented economic boom. On the mainland, a liberalized economy is building a middle class eager to spend on consumer goods. In Macao, three new casinos opened in the past 12 months with at least five more coming on line during the next year. In Hong Kong, the gateway into China for many multinational corporations, more investment funds, hedge funds, and investment banks are entering the market or expanding. A recent Hong Kong government survey showed a 25% increase over the past five years in the number of regional headquarters located in the city.

What are the three big challenges facing companies planning to establish an office in the region and make the most of these economic opportunities? Most likely they are: cross-border differences in labor laws, taxes, and economic regulations; environmental issues (especially air and water pollution); and infrastructure for business growth—transportation, housing, and schools.

However, the real point right now—and the only topic of conversation—is the ability to attract, hire, and retain high-quality employees. Despite the large population in Greater China, there is a shortage of qualified candidates across many job sectors including property, accounting, hospitality, retail, secretarial, and administration. Why?

More Jobs Than Workers

In mainland China, following years of limited economic growth, there has been relatively sudden and strong development in the job market. As a result, there is a dearth of experienced, professionally mature managers. Young, relatively inexperienced employees are in high demand and as a result, job-title inflation and salary inflation are both high.

Job turnover is a widely discussed phenomenon; the Hong Kong Institute of Human Resource Management recently cited a growth in the staff turnover rate to a record high overall of 4.22%. The sharpest increase was reported in the property development and real estate sector, at 13.88%, followed by 8.27% for retail. Hong Kong's unemployment rate is the lowest in nine years, at 4.1%. In Macao, with the new Sands, Galaxy, Wynn, and Venetian casinos open, and more to come, the unemployment rate has declined to just 3.1%, compared to 6% in 2003.

So what should a multinational looking to hire and retain employees in Greater China do? Like it or not, salary is still the No. 1 factor affecting employee decision-making in China. The cost of living is high in Hong Kong and rising in Macao and China. Candidates understand that it is a seller's market and are determined to go for the highest possible compensation. In one recent example, an accounting candidate accepted a new job and 22% salary increase to move to the Hong Kong office of a top-tier financial-services firm, only to later reject that offer for another with an overall 64% increase in compensation.

In that scenario, money won. This type of situation is challenging for any large corporation with established operations in the region. Some companies choose to deny the reality and insist employees are overpaid and candidates want too much. Human resource teams worry about salary compression and inequality. At this point, we can only advise that money has to be part of the picture, but not the only part. A company must be realistic about salary levels but cannot look at employee attraction and retention as a purely financial transaction. There are many ways to improve the odds.

From Handshake to Offer Letter

It is crucial from the first moment of the initial interview to establish employer brand and corporate culture on the employer side, and to assess candidate interest and motivators. Focus on the qualities of the ideal candidate for your firm and develop the interview skills to elicit and assess those qualities. Don't overreach. If, for example, you need a secretary who speaks fluent English and Cantonese, but doesn't really need to read Chinese characters, don't insist on it.

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