CHAPTER 3 POPULATION, LABOUR AND EMPLOYMENT
POPULATION
Although Macau had been occupied by Portugal for more than 400 years,it remains a Chinese-dominated society. About 95 percent of the population are Chinese1, and are mainly from Guangdong province. About 10,000 Macanese or locally born Portuguese form the second largest group of residents in Macau.
In the 1990s, the number of residents in Macau had been increasing, from 339,510 in 1990 to 430,549 in 1998. It represented an increase of 91,039 during the period. Only 39.2 percent of the increase was due to the "natural" factor (i.e. births minus deaths). The other 60.8 percent of the gain was on account of population inflows from other countries, including the net increase in immigrants (36.7 percent) and the net increase in imported workers (24.1 percent).
Sources: Cheng et al. (1994), Table 3-1, Huang & Chiang (1994), p.3, Anuario Estatistico, various issues.
About 40 percent of the immigrants in the 1990s were from Mainland China. The latest agreement (March 1998) between the Chinese and Macau Governments is to limit the number of Chinese immigrants to Macau to 280 persons a month.2 Most of the Chinese immigrants have become permanent residents of Macau. Non-Chinese immigrants are those who are allowed to reside in Macau with a residence certificate. Unlike Chinese immigrants, they may leave after a few years' stay in the Territory. In 1998, 59.8 percent of the foreigners who were permitted to stay in Macau came from Hong Kong. Other foreigners were mainly from the UK, the Philippines, the USA and Thailand.
Compared with the population figures provided by the World Bank (1995),Macau's population mobility measured by the portion of foreign-born population is the highest in the world. According to Macau's by-census in 1996, only 44.1 percent of Macau's residents were born in Macau. It is significantly lower than 65 percent in the region of the Gulf Cooperation Council, which is reported by the World Bank as the lowest in the world.3 About 47percent of Macau's residents were from Mainland China, while in Hong Kong, the ratio was just 35 percent. Over 20 percent of the Macau residents have only stayed in Macau for less than 10 years. New immigrants could be an economic burden on the Macau society, at least in the short run and especially in the recessionary period.
Macau's dependency ratio, measured as the proportion of the total population aged 0 to 19 and 65 and older4, was 38.4 percent in 1998 and has been stable in the past few years. By Asian standards, Macau's ratio is at the lower end. It implies that Macau currently has a favourable population structure under which the non-productive members pose a relatively mild financial burden to the economically productive labourforce. However, alarming signs do emerge as the number of elderly has been increasing in the past few years. Like the other advanced economies, Macau has a very low death rate, at 3.2 percent in 1998, though the birth rate has also been falling, from 16.3 percent in 1993 to 10.4 percent in 1998. If the migration structure remains unchanged, the dependency ratio will increase in future years. It may also adversely affect the population quality by reducing the number or growth of the economically active population.
LABOUR QUANTITY AND QUALITY
In the fourth quarter of 1998, the labourforce participation rate, defined as the ratio of labourforce to all residents with an age of 14 or over 14, was 65.2 percent in Macau. The rate has remained quite stable in the past few years, and is regarded as above average among high-income earning Asian economies.5 The labourforce in Macau was estimated to be 213,200. About 90 percent of the employed population were employees, and the rest were self-employed or family-employed.
Sixty three point two percent of the labourforce were mostly from "productive", "innovative" and "adaptable" age (25-44) in the last quarter of 1998.Ten point two percent of Macau's labourforce had tertiary education, while 74.3 percent finished only Form 3 secondary schooling or below. The percentage of labourforce with higher education background in Macau is low compared with Hong Kong and other high-income economies in Asia, but this percentage has significantly improved over time. In the early 1980s, only two percent of the labourforce in Macau had tertiary education (Tse 1990).
According to some empirical studies of Asian countries, productivity performs a positive relationship with the average schooling years of workers (Sousa 1996). The low educational attainment of Macau's labourforce is therefore expected to be a hindrance to the labour productivity growth. As compared with Hong Kong, Macau's labour productivity is significantly lower. GDP per worker in Macau was MOP271,600 in 1998, while comparable figure in Hong Kong was MOP410,700. Macau's workers are about 34 percent less productive than Hong Kong's workers. The size of Macau's workforce was about six percent of that of Hong Kong in 1998, but its GDP was only equivalent to four percent of Hong Kong's GDP.
EMPLOYMENT
Of the seven major economic sectors classified by the Direccao dos Servicos de Estatistica e Censos, the sector of public administration, social and personal services employs the largest number of workers in Macau. The manufacturing sector employs more than 40,000 workers, but 40 percent of them are estimated to be contracted labour from abroad. Public utilities including electricity, gas and water employ the smallest number of workers among all major sectors, but offer the highest wage rate. In 1998, the sector's median wage rate was MOP9,969. On the contrary, the manufacturing sector offered the lowest median wage of MOP3,132.
Unit: MOP
Source: Inquerito ao Emprego, various issues.
The positive relationship between wage and productivity generally holds true in Macau. As shown in Table 3.3, workers in electricity, gas and water are the most productive among all sectors, while workers in the manufacturing sector are least productive. The sectoral comparison indicates that workers in the worst paid sector are not necessarily "economically underpaid", as wages are determined vis-à-vis labour productivity. Electricity, gas and water, public administration, social and personal services and finance, insurance and real estate are all relatively well-paid sectors in which workers are more productive.Workers in the finance, insurance and real estate sector are actually underpaid in view of their high labour productivity. The sector's wage-output ratio is the lowest among all sectors (0.006). The sector of wholesale, retail, restaurants and hotels offers low money wages, but the less productive workers in this sector are in fact relatively overpaid, with a high wage-output ratio (0.040)!
Soruces: Underlying data from various issues of Inquerito ao Emprego and Produto Interno Bruto 1997.
Further examination of wage and productivity across sectors reveals some interesting phenomena in Macau's labour market. Supposing that the manufacturing sector is used as a basis for comparison (Table 3.4), workers in finance, insurance and real estate are seven times more productive than manufacturing workers, but they are only making 72 percent more than the manufacturing workers. On the other hand, workers in wholesale, retail, restaurants and hotels earn 49 percent more than manufacturing workers, but they are only one percent more productive than manufacturing workers! Productive workers in Macau are generally well worth to be employed from the em-ployers' point of view. This phenomenon probably reflects some degree of inefficiency or distortion in the labour-market adjustment process, notwithstanding the existence of a roughly positive relationship between wage and productivity. It is predicted that once the economy resumes a strong growth,workers in the high-productivity sector should be the first to benefit.
Note: *The simple correlation coefficient is calculated by the following equation:
Values of the correlation coefficient are always between -1 and +1. A value of +1 indicates that X and Y are perfectly related in a positive linear sense,
whereas a value of-1 indicates that X and Y are perfectly related in a negative linear sense.Values of the correlation coefficient close to zero indicate that X and Y are not linearly related.
Source: Author's calculation based on the data in Table 3.3.
Wages in low-productivity sectors are unlikely to catch up with those in other sectors, unless employers of the low-wage sectors invest in labour quality and capital. Such investment will increase labour productivity, which is a crucial determinant to wages. Based on our sectoral comparison, the wage gap between low-productivity and high-productivity sectors is not wide enough to effectively reflect their productivity difference. It should be noted that the manufacturing and wholesale, retail, restaurants & hotel sectors employ the largest number of imported workers, which are likely to contribute to the low labour productivity in these sectors (Chan and Lei 2000). This analy-sis shows that the general belief that imported workers help maintain low labour costs in Macau is a misconception. Those low-paid workers are in fact relatively expensive if their productivity is taken into consideration. Importation of "cheap" labour in Macau is therefore not necessarily and economically justifiable in enhancing cost competitiveness.
UNEMPLOYMENT AND LABOUR IMPORTATION
Over the past few years, Macau has experienced an alarming deterioration in the labour market performance. Coupled with the persistent slowdown in economic activity, unemployment rate rose to 4.5 percent in the second quarter of 1996 from about two percent in the early 1990s (Table 3.5). The employment condition improved slightly in 1997, but deteriorated again at the beginning of 1998. Unemployment rate reached an all-time high of 6.3percent in the second quarter of 1999, while underemployment rate was also approaching two percent. Over 13,000 domestic workers are currently unemployed; among which over 1,000 have been the number of the unemployed for a long period.6 Another 3,000 workers are reported to be underemployed in the sense that they could only find work for less than 35 hours a week.
Source: Inquerito ao Empreqo, various issues.
The significant increase in the number of the unemployed has caused widespread concerns about the labour importation policy in Macau. The local labour union argues that imported workers are displacing local workers in the job market. On the other hand, business representatives mainly from the manufacturing sector have countered that imported workers are not a factor of local unemployment as local workers are unwilling to work in factories or in elementary occupations.7
From a macro point of view, cross-border labour mobility is an effective means of economic adjustment, especially when the economy is adopting a fixed exchange rate regime (Mundell 1961). When an economy is at full employment level, imported labour will help combat inflation and extend the production capacity. On the other hand, when an economy suffers from recession, labour outflow, whether it is in the form of repatriation of foreign workers or exportation of domestic labour, would accommodate the adjustment process. The role of international labour mobility in macroeconomic adjustment is especially vital for Macau, which is not allowed to utilize currency depreciation to stimulate demand for domestic products and employment.
The micro aspect of labour importation is equally important. If the domestic workers and imported workers are actually suited and seek for different types of jobs, the reduction in the number of imported workers, at least in the short run, is unlikely to significantly reduce the size of the unemployed population. Repatriation of foreign workers in this case will immediately inhibit certain productive activity and further generate an adverse supply shock to the economy.8 The outcome could be the most undesirable stagflation.
Although Macau is reputed to be a very open territory with high international labour mobility, few scientific measurements of its extent have been carried out. One method suggested by DeGrauwe and Vanhaverbeke (1993)is the numbers of gross emigration and immigration, or cross-border population flows. Table 3.6 presents actual figures for net population inflows and estimates for gross population outflows and inflows in Macau between 1993 and 1998. Net population inflows are derived from the change in population plus the number of deaths minus the number of births during the year. The Macau Government has provided the estimated number of gross population outflows since the early 1990s. The estimate of gross population inflows is simply the sum of net inflows and estimated gross outflows. It is shown that the cross-border population flow, as a percentage of the population always stays at a high level of over six percent in Macau. In the six-year period of 1993-1998, the average percentage was around seven percent. The figures in Hong Kong and some European countries, on the other hand, seldom exceed three percent.9
Note: Figures in brackets are percentages of total population.
Source: Underlying data from various issues of Estimativas da População Residente de Macau.
Further examination of the inflows and outflows data indicates that the high mobility rate is mainly attributed to imported labour. According to Direcção dos Servi~`cos de Estatistica e Censos' Estimativas da População Residente de Macau and Estatisticas Demográficas, population inflows are due to foreigners allowed to reside in Macau, incoming imported workers (under Decree Law No. 12/GM/88 and Decree Law No. 49/GM/88), as well as legal and illegal immigrants from China. Based on the same sources, population outflows include leaving foreigners who are previously allowed to reside in Macau, outgoing imported workers and Macau emigrants. As shown in Table 3.7, imported workers have accounted for a major portion of cross-border population flows. Between 1993 and 1997, on average 67.71 percent of Macau's gross population inflows can be explained by imported workers, while leaving imported workers as a percentage of Macau's gross population outflows was as high as 79.43 percent.
Sources: Underlying data from various issues of Estimativas da População Residente de Macau and Estatísticas Demográficas.
To better evaluate the significance of the cross-border population flow in labour market adjustment, the number of economically active people in the migrating population is estimated by assuming that Macau's labourforce participation rate is applicable to the migrating population (excluding foreign workers who are by definition active labour). The estimated number of migrating workers has been greater than the number of total unemployed workers in Macau in recent years, and was more than two times the number of unemployed workers in 1998. The potential impact of international labour movements on economic stability should therefore be very significant. As imported workers have been a major factor of cross-border population flows and hence international labour mobility in Macau, proper manipulation of the number of imported workers should help the Territory to better adjust to the cyclical fluctuations from a macroeconomic point of view.
Note: *(a) times Macau's labour force participation rate during the year.
Sources: Underlying data from various issues of Estimativas da População Residente de Macau,Estatísticas Demoaráficas and Inguérito ao Emprego.
From a macro point of view we can not confidently rule out the hypothesis that imported workers have an impact on the employment-related economic adjustment in the Macau economy. Further study of the development in the local labour market should enable us to have a better understanding of the relationship between labour importation and unemployment in Macau.Arguments of the labour union and the business associations have to be individually examined.
From the union's point of view, local employers are substituting foreign workers for domestic workers. Statistics tend to support a "crowdingout" symptom in the local labour market. Table 3.9 lists the number of imported workers and the estimated number of employed local workers. The estimated number of employed local workers is simply the difference between the number of employed workers and the number of imported workers. Between 1992 and 1995, the number of imported workers increased from 21,088 to 35,286. During the same period, the estimated number of employed local workers slid from 148,094 to 145,062. It implies that only imported workers benefited from a stronger effective demand for labour during the period, as evidenced by a marked increase in the number of employed workers from 169,182 to 180,348. The rising ratio of foreign workers to total employed workers also indicates an increasing reliance on imported workers for local employers.
On the other hand, when the number of imported workers fell in 199697, the estimated number of employed local workers increased substantially from 145,062 to 170,877. This time the local workers became the sole beneficiary of the strengthening in effective labour demand as the employers' reliance on imported workers subsided. Correspondingly, the ratio of foreign workers to total employed workers dropped from 19.57 percent in 1995 to 14.82 percent in 1997.
Sources: Underlying data from various issues of Estatísticas Demográficas and Anuario Eststistics
From a dynamic perspective, the growth of imported labour also exhibits a negative relationship with the growth of employed local workers.Table 3.10 presents the changes of the two variables. The value of correla-tion coefficient for the two series of data is -0.92, indicating that the two variables are linearly related in a negative manner. Our statistical analysis tends to support the local workers' argument. Increased labour importation has been associated with reduced number and growth of employed local workers in Macau.
Note: *Adjusted to exclude imported workers.
Sources: Underlying data from various issues of Estimativas da População Residente de Macau and Inguérito ao Empreqo.
Meanwhile, the employers' argument for supply and demand mismatch also requires verification. It can be interpreted from two viewpoints. First,the jobs taken by the imported workers are underpaid from the local workers' point of view. Second, the unemployed workers' personal capacity, including work experience and professional skills, is not suited for the jobs taken by the imported workers.
Table 3.11 shows the average salary ratios between imported and local workers of selected economic sectors, surveyed by the Direcção dos Serviços de Estatistica e Censos. Imported workers are shown to normally occupy some low-paid jobs. In the manufacturing sector, the average salary of imported workers is 33 percent less than that of local workers. Imported workers in hotels are earning about 32 percent less than their local counterparts. The ratios properly understate the disparity because salaries for local workers in the survey do not include year-end double pay and bonus, which are mainly paid to local employees in private firms. Imported workers in the banking industry are normally well-paid by local standards, but their number is insignificant.
Unit: Percent
Source:Inquérito as Necessidades de Mão-de-Obra e as Remunerações, various issues.
The Inquerito as Necessidades de Mão-de-Obra e as Remunerações also provides some information about job vacancies in manufacturing and hotels.The sampled firms in the manufacturing industry have reported strong demand for unskilled or semi-skilled workers (especially in garments and chemicals & plastics). Similarly in hotels, there is relatively strong demand for waiters/waitress, and cleaning staff, which only requires minimum professional skills and formal education.
The Macau Government does not disclose the occupation, profession and education information about the imported workers. The gender distribution and the distribution of country origins of imported workers can be found in Estatisticas Demográficas. The available information therefore restricts the analysis of job matching between imported workers and unemployed workers. Chio (1998) argues that in view of the generally low pay of imported workers, most imported workers in Macau are believed to be unskilled or belong to the low profession level.
On the characteristics of the unemployed population, Inquérito as Emprego published by Direcção dos Serviços de Estatística e Censos provides some useful hints. Over 80 percent of the unemployed workers only have a Form Three or a lower level of education (Table 3.12). About half of the unemployed workers are previously employed and intend to find a job in the manufacturing industry or hotels, restaurants and commercial sales sectors, which are reported to employ many imported workers. More than 80 percent of the unemployed are previously employed as craft and related workers, service or shop sales workers or in elementary occupations, and most of them still in-tend to find those relatively lower paid and low-skilled manual jobs. One interesting piece of information about the unemployed population is that few of them are "voluntarily unemployed". Only 25 percent of them left their previous positions due to "unsatisfactory work conditions" or "personal reasons" such as taking care of children or pursuing studies.
Source: Inquérito ao Emprego, 1998Q4 Issue.
It should be concluded that the majority of the unemployed workers in Macau are previously low-paid and are from low professional and educational levels. They have low inter-industry and intra-industry mobility because of their less competitive capacity and unwillingness to change jobs. Very few of them are voluntarily unemployed with an intention to search for a different and better job. All these characteristics seem to fit the existing jobs offered by local employers and those jobs currently occupied by imported workers. It is therefore hard to argue that the unemployed workers are unwilling to take up the jobs currently occupied by the imported workers or the vacant jobs in the market, if the difference between their salary expectations and the actual offers is ignored.
The ratio of imported workers to total labourforce in Macau is in fact very high when compared with other major Asian economies. It stayed at 14.6 percent in 1998, while in Hong Kong the ratio was only about six percent.Singapore has imported quite a lot of workers, under a situation that the city state's manual and unskilled labour is obviously in short supply. Macau's high ratio can be maintained without creating macroeconomic adjustmentproblems only if the Territory could sustain a cyclical upturn as experienced in the 1980s and early 1990s.
It is suggested that Macau's labour importation policy should be consistent with the development of macroeconomic environments, or local business cycle. The current programme, which was originally established in 1988,should be properly revised. Modifications should be made in view of the dominant role of imported workers in international labour mobility and hence, in macroeconomic adjustment. Improvement should be in the direction of establishing a mechanism, under which the number of imported workers can speedily respond to the varying number of the unemployed.
NOTES
1 Due to Macau's special historical background, thousands of Chinese citizens who reside in Macau are allowed to hold Portuguese passports, which are used as travel documents.See Sino-Portuquese Joint Declaration. 13 April 1987.
2 See Macao Daily News, 27 June 1999.
3 In fact, Hong Kong also has a lower ratio of 60 percent.
4 It is a measure provided by the Asian Development Bank.
5 For example, Hong Kong's rate stays at about 62 percent.
6 Long-term unemployed are those who are unemployed for one year and more.
7 See Macao Daily News, 24 October 1998.
8 For an analysis of GDP contribution of imported labour, see Chan (1999e).
9 For an estimate for Hong Kong, see Chan (1997). Comparable figures of inter-regional gross migration as a percentage of total population within selected European countries are in DeGrauwe and Vanhaverbeke (1993).
