Forcing casino operators to use local construction workers won’t solve Macau’s labour issues
There is a commonly held belief, expressed on occasion in this magazine, that Macau residents are, educationally speaking, underachievers.
It seems that’s not strictly accurate. In 2006, Macau was in the top eight countries or regions for performance in mathematics among 15 year olds, according to a triennial study by the Organisation for Economic Cooperation and Development (OECD). Perhaps that’s the real reason so many Macau school leavers want to become casino dealers.
This achievement wasn’t singular. In the 2003 edition of the OECD study known as PISA—the Programme for International Student Assessment—Macau was in the top five for science and the top six for something called ‘problem solving’.
Educational attainment in Macau | ||||||||
2007 | 2008 | 2009 | 2009 Q1 |
2009 Q2 |
2009 Q3 |
2009 Q4 |
2010 Q1 |
|
Highest education attained (%) | ||||||||
No schooling/Pre-primary education | 8.9 | 8.3 | 9.1 | 8.5 | 10.5 | 8.7 | 8.5 | 8.4 |
Primary education | 27.9 | 26.4 | 25.8 | 23.5 | 30.4 | 25.9 | 22.8 | 31.7 |
Junior middle education | 31.6 | 27.4 | 30.4 | 34.0 | 27.9 | 29.0 | 30.9 | 30.7 |
Senior middle education | 21.9 | 22.1 | 21.5 | 22.1 | 19.7 | 19.8 | 24.9 | 19.6 |
Tertiary education | 9.7 | 15.7 | 13.2 | 11.8 | 11.5 | 16.6 | 13.0 | 9.5 |
Source: Macao Economic Bulletin / DSEC |
One problem that the next generation of Macau’s leaders will have to solve is not so much educational underachievement (the territory’s young people clearly do rather well, especially in the sciences, when opportunities are available) as a lack of a strong tradition for ongoing education. In the first quarter of this year, only 9.5% of Macau high school graduates were in tertiary education (i.e. study beyond the age of 17 or 18). In Hong Kong, 18.5% of 17 to 20 year olds took a first year, first-degree course in higher education during the academic year 2009-10, according to Hong Kong’s University Grants Committee.
The gap between Macau and Hong Kong is even more marked in primary and secondary education. A total of 31.7% of Macau residents haven’t gone beyond primary level education, according to figures released in Q1 2010 by DSEC, Macau’s Statistics and Census Service. One would hope that this figure is an historical anomaly that will be reduced as social conditions improve in Macau. And yet the percentage leaving education with only primary instruction actually went up year on year in Macau in the first quarter of 2010 compared to Q1 2009. A further 8.4% either never went to school or received only pre-school instruction. Before a new Labour Relations Law was enacted in 2008, Macau residents could leave school at 14 and legally start work. The age for full time employment has now been raised to 16. That policy certainly didn’t create a stampede for university places. In Q1 2010, 30.7% of the Macau school population got no further than junior middle education (i.e. age 16).
In other words, there is currently in Macau a culture of exiting education as quickly as possible in pursuit of work. During the days of Stanley Ho’s gaming monopoly under STDM, that lack of a strong tradition in post-16 education wasn’t a significant impediment to Macau’s economic progress. Up until the mid-1990s, Macau was still a relatively low skill, low wage, industrial and commercial economy with some gaming. That was at a time when Hong Kong, by contrast, had already significantly de-industrialised and was starting to reinvent itself as a gateway for investment into China.
Since the liberalisation of the Macau casino industry in 2002 and the opening of the first foreign owned casino, Sands Macao, in 2004, the locals’ culture of early exit from education has been reinforced by a policy decision that casino dealer jobs should be reserved for permanent residents. Competition between casino operators vying to employ 18 year old school leavers looking for their first job has helped push the median dealer wage up to MOP13,000 in Q1 2010. That makes card dealing one of the best-paid occupations in Macau behind public administration and financial services. It’s also, however, a job with a distinct glass ceiling unless dealing staff are willing to return to education to develop new skills to perform other roles within the organisation.
Modern gaming resorts are systemically very complex and need highly skilled and highly trained professionals to manage them effectively. Currently, therefore, Macau cannot avoid importing some people to occupy that role.
Non-resident workers in Macau | |||||||||
2007 | 2008 | 2009 | 2009 Q1 |
2009 Q2 |
2009 Q3 |
2009 Q4 |
2010 Q1 |
||
Inflow of non-resident workers | number | 66,206 | 65,905 | 33,250 | 8,863 | 9,004 | 7,702 | 7,681 | 7,837 |
y on y % change | 18.7 | 5.9 | 19.5 | 12.0 | 53.9 | 58.6 | 38.5 | 11.6 | |
Non-resident workers in Macau | number | 85,207 | 92,161 | 74,905 | 87,789 | 83,616 | 77,239 | 74,905 | 72,843 |
y on y % change | 31.8 | 8.2 | 18.7 | 2.5 | 15.1 | 25.9 | 18.7 | 17.0 | |
Source: Macao Economic Bulletin / DSEC |
That said, the number of imported workers in Macau is well below the peak reached in 2008, when there were 92,961—equivalent to 28.8% of the employed population at the time. After the global financial crisis that began in September 2008, the Macau government ordered casino operators to reduce the number of ‘blue card’ holders on their books. People were let go almost overnight, with just ten days to leave Macau after the termination of their employment. Between the end of 2008 and the end of 2009, the number of non-resident workers in Macau fell by 18.7%.
At the end of Q1 2010, there were 72,843 non-resident workers in Macau, with the inflow down 11.6% in Q1 2010 compared to the same period a year earlier.
It’s only by the good grace of the Macau government that foreign investors were allowed into the local casino market in the first place. It’s perfectly reasonable, therefore, that Macau would want to engineer its job market to benefit its own people, and not those of Hong Kong or foreign countries thousands of miles away.
The issue is not Macau’s sovereign right (or at least subsidiary sovereign right as a Special Administrative Region of China) to do that. It’s that it would probably benefit everyone if it could be done in as rational and coherent a way as possible.
Despite the skills gap in the local economy, most Macau residents already have jobs, even if not always particularly interesting or glamorous ones. So when the government sets quotas for a certain proportion of locals in a key industry such as construction, the employers have to poach workers from other sectors. The unemployment rate among residents was only 3.7% in the first quarter of this year, according to DSEC. That would be counted as statistical full employment in many European Union countries.
Local residents need to be moved up the value chain in terms of skills and income so that more of them are doing the higher level, well-paid jobs and the migrant workers are mostly doing the low paid ones. That’s how the labour market increasingly works in the United Arab Emirates, where there’s been a policy of localisation of labour, known as ‘Emiratisation,’ for the past 12 years.
The UEA’s Council of Ministers issued a directive as long ago as 1998 requiring all banks to increase their intake of UAE nationals at the rate of 4% per year. In 2004, the cabinet issued another resolution approving a set of measures for boosting Emiratisation of jobs in the private commercial sector.
Inside Asian Gaming understands from gaming industry sources that Macau, aside from reserving casino dealer jobs for permanent residents, also has a policy of incremental localisation for pit supervisor and pit manager jobs. Insiders say the crucial difference in Macau is that this objective has not been formalised and written down as a directive or government policy. As a result, casino operators can’t be sure that the policy is being instituted evenly across the local industry, nor can they be sure that their cooperation will pay the political dividends they might reasonably expect in terms of building goodwill with the locals and the government.
Arguably, the advantage of the UAE approach to localisation is that it is transparent, managed incrementally and backed by policies to improve the take up of higher education and professional skills among locals. The latter element means that in the medium to long term, employers don’t suffer a fall in efficiency by taking on local people, because there’s a managed programme to improve and develop the skills of those local staff.
A similar process of localisation will take time in Macau, and needs the help of strong and clear policies backed by a higher take up of further education to make it work effectively. Simply announcing overnight that one local should be hired for every outsider brought in, as happened recently with the construction industry in Macau, isn’t going to help if the local people don’t have the necessary skills and perhaps even the motivation to do those jobs.
Non-resident workers in Macau | |||||||||
2007 | 2008 | 2009 | 2009 Q1 |
2009 Q2 |
2009 Q3 |
2009 Q4 |
2010 Q1 |
||
Unemployed population | thousands | 9.5 | 10.0 | 11.7 | 12.8 | 11.9 | 12.3 | 9.9 | 9.5 |
y on y % change | -9.1 | 6.1 | 16.3 | 32.9 | 30.2 | 17.5 | -10.3 | -25.8 | |
Age Group (%) | |||||||||
16-24 | 28.9 | 27.9 | 27.6 | 28.8 | 27.8 | 30.0 | 22.7 | 23.5 | |
25-34 | 16.4 | 13.6 | 14.1 | 15.2 | 11.9 | 16.4 | 12.2 | 23.5 | |
35-44 | 19.0 | 20.8 | 17.4 | 17.8 | 19.4 | 15.9 | 16.3 | 18.7 | |
45-54 | 25.7 | 29.1 | 28.9 | 28.0 | 27.1 | 28.3 | 33.2 | 31.9 | |
55-64 | 10.0 | 8.5 | 12.0 | 10.2 | 13.8 | 9.4 | 15.6 | 13.4 | |
≥ 65 | – | – | – | – | – | – | – | – | |
Source: Macao Economic Bulletin / DSEC |
According to the Macao Economic Bulletin for the first quarter of 2010 published by the government, there were only 9,500 residents registered as unemployed in the territory. Sands China has said previously it needs 10,500 workers for its Cotai 5 and 6 project. It doesn’t need all of them all at once, but it needs them nonetheless across the life of the project, which could take up to three years to complete.
The net result of the government’s one-for-one policy on construction workers seems to have been not to produce greater opportunity for the people of Macau, but to create administrative and practical bottlenecks in the execution of two of the biggest gaming real estate projects in the territory. Those projects are the US$1.8 billion Galaxy Macau, the Cotai resort from Galaxy Entertainment Group, and the US$2.4 billion Cotai 5 and 6 from Sands China.
The casino operators and their contractors and sub contractors will eventually jump through the necessary legal and commercial hoops and employ more locals. That may mean throwing more money at the problem and raising construction sector wages to attract locals from other sectors. Something similar happened in the casino dealer segment at the time of the ‘Big Bang’ of new casino openings on the Macau peninsula in 2006 and 2007. But such an approach simply shifts Macau’s structural labour problems down the line to other sectors that find it hard to compete with casino and construction wages. Between 2007 and 2008, median wages in Macau’s construction sector rose 17.6%. In the same period, hotel and restaurant median wages grew by only 10.9%.
In Q1 this year the median monthly income in the hotel and restaurant trade was MOP7,000. In the same period, the median construction salary was MOP9,300. The median monthly salary for a casino dealer was MOP13,000.
Hiking construction wages this time around could mean a flight of local people from jobs in the restaurant trade, leading to more establishments closing. The surviving restaurant businesses may then be forced to pay better wages to compete with construction, thus helping to drive up the cost of restaurant meals and further fuelling an upward inflationary spiral in the local cost of living that affects everyone.
In 2008, inflation in Macau peaked at 8.6% according to DSEC, but fell back to 1.2% in 2009. It is currently creeping up, reaching 1.5% in Q1 2010, compared to 1.2% a year earlier.
Inflation has certainly been cited by Macau residents quoted in local media as a cause for concern. In some cases, residents have put the blame on expatriates and their generally above local average salaries for pushing up the cost of living.
Perhaps a more relevant point is that the arrival of a new wave of expatriates is a function of economic development. Such development often produces inflationary pressures as a side effect, as has also been seen on the Chinese mainland.
So how should Macau tackle its underlying labour market weaknesses? Macau’s first chief executive, Edmund Ho, suggested during his second term the idea of raising the casino entry age to 21, thus creating an immediate incentive for locals to attend tertiary or higher education. He added that those casino workers under 21 at the time a new law was enacted would be allowed to stay on. He was backed at the time by Dr Stanley Ho. Nobody could accuse Dr Ho of being a ‘here today gone tomorrow’ kind of capitalist.
Locals can join the police at the age of18, so some fretted that could create a bizarre situation whereby police wouldn’t be able to enter a casino on official duty. That’s clearly a red herring. Dispensations could be made for public security personnel on official duty. Getting more people into tertiary and higher education is a question of political will, not technicalities.
The Monetary Authority of Macao announced it had foreign exchange reserves of MOP163.7 billion (US$20.42 billion) at the end of June 2010. If Macau can afford to spend US$1 billion on a light rail system to move tourists around, it can certainly afford to pay its young people educational support grants. That would allow students to stay in education beyond 18 without their choice having a short-term negative impact on their family’s income. And if there aren’t enough places at local educational institutions, then they should be paid to attend courses on the Chinese mainland or Hong Kong. A condition of the support grants could be that the students must return to Macau after graduation—possibly to take up placements with casino operators and other key employers, and thus preventing a brain drain out of Macau by its brightest and best.
Educational support grants may be the only answer in the short term. With two new casino resorts due to open on Cotai between 2011 and 2012-13 requiring a possible 22,000 new workers, according to some estimates, there’s virtually no chance of the casino entry age being raised before then for fear of creating a chronic shortage of already scarce local staff.
The time may have come, however, when Macau’s lawmakers need to rethink the policy of reserving casino dealing jobs for locals. In theory, it’s a good idea to allow the locals to benefit from the casino boom by reserving for them some of the highest paid entry-level jobs. In practice, it’s in danger of institutionalising the economic rationale for leaving education early. That risks leaving Macau permanent residents permanently at the bottom of the educational achievement ladder, giving highly complex businesses such as casino resorts little choice but to ask to import more highly skilled staff.