(Reprinted from HKCER Letters, Vol. 4, September 1990)
Skilled Immigrants from China
Alan K.F. Siu
The government has decided to deal with the tight labor market in Hong Kong by allowing firms to import 2,700 skilled workers and 10,000 experienced operatives. Instead of relying on the market mechanism, the government sets minimum wages for each category of imported labor, and imposes category-specific quotas. Firms employing imported workers have to provide those workers with housing.
Administrative control of the labor market is pure folly. In the last issue of the Letters, an article cogently points out that a more liberalized immigration policy is a much better long-term measure to tackle the labor shortage. Immigrants tend to be hard-working people. Because of their longer horizons, immigrant workers have more incentives than imported workers to invest in human capital that is specific to Hong Kong. The success of Hong Kong has been largely built on the efforts of past immigrants. There is no reason why new immigrants would not contribute in the same way.
Last year, there was a net flow of 35,300 migrants into Hong Kong. With 27,300 legal immigrants from China, and an estimated outflow of 42,000 emigrants, this means 50,000 people moved here from other countries.
A foreigner can legally work in Hong Kong if he has special skills or can contribute substantially to the economic well-being of the country. Last year, 11,409 professionals and skilled workers from over 30 countries were admitted for employment. After seven years, foreigners are eligible for permanent residence.
Since 1982, a daily quota of 75 immigrants from China are allowed legally into Hong Kong. Last year, out of the 27,300 admitted, 9,565 were wives, 13,216 were children, and 937 were husbands of local residents. The Chinese government issues one-way permits for these people. The Hong Kong government has no direct say about who will be granted permits; it can only control the total number.
Hong Kong's immigration policy towards China is special. Most of the Chinese immigrants are relatives of local residents and are admitted for family reunification. Foreign skilled workers are permitted to stay because of their contribution to the economy. Their dependent family members are also allowed entry. There is a quota on Chinese immigrants, but none for the rest of the world.
A dynamic skilled labor force is an indispensable engine of growth. Due to political uncertainties, quite a sizable proportion of Hong Kong's skilled workers have either emigrated, or are in the process of doing so. With less-skilled workers, the returns to capital will be lower because of complementarity. The lower returns prompt an outflow of capital. The Hong Kong Bank and the Jockey Club have both decided to relocate their computer operations overseas because of the lack of experienced operators here. If the stock of skilled labor force keeps on getting smaller, the outflow of capital would turn into an exodus.
If we lack skilled workers, why not produce more locally? The dental school story is relevant. The cost of training a dentist here is at least a million dollars. The starting salary of a dentist is about $6,000 a month. A Form 5 graduate, with six fewer years of formal education, can make $4,000. The rate of return for dentists is disappointing. No wonder, the dental school has difficulties in filling its quota of first-year students. Sometimes it is cheaper to import than to produce. And it is dirt-cheap to import from China with her vast reservoir of skilled human resources.
At present, a firm is not subject to any restrictions on hiring experienced professionals from overseas. Approval from the immigration department is routine. However, if the firm wants to bring in someone equally qualified from China, but only at a fraction of the cost, its another matter. In China, an individual does not have exclusive property rights over his human capital. The state, as well as his work unit, have claims on that property. A scholar in China cannot just pack up his bags and move to Hong Kong to teach at one of our institutes of higher learning. Besides the job offer, he has to secure approval from his work unit, the Chinese government, and Hong Kong's immigration department.
Cutting through all the red tape can be daunting even for Hong Kong's entrepreneurs. The Hong Kong government should open up discussions with the Chinese government on streamlining the mechanism to bring in skilled immigrants from China. On top of the existing 75 daily quota which basically serves the purpose of family reunification, a new category based on a point system can be set up to cater for the needs of the labor market. More points can be given to, say, young single university female graduates to redress the imbalance in the sex ratio. The quota limit as well as the system of point allocation can be adjusted from time to time to take care of current requirements of the labor market.
Over time, skilled professional immigrants from China will be integrated smoothly into Hong Kong's society. Some of them will blossom to take up responsible positions. While Hong Kong does not need mandarins from China to run things here, it helps to have more local residents who know the detailed mechanics of the two systems. A rational Chinese government would welcome and support such a development. The Hong Kong government has to take the initiative. Such bridges have to be built sooner or later. Now is a good time to start.
Dr. Alan K.F. Siu is a lecturer in Economics at the University of Hong Kong.