in the SCMP: Published by SCMP 30th May 2014.
Beware of future policy changes
In the last few years, I have seen many resumes of excellent financial professionals whose careers are broken. Until 1997, and the Asian financial crisis, most professional careers did rather well. People had worthwhile jobs and they were motivated, hardworking and diligent.
Since that date, exacerbated by 2002 (because of SARS) and 2008 (the global financial crisis), the career path of financial and other professionals have become substantially less appealing for both employee and employers. CV’s show one year here, two years there; often in jobs for which they are overqualified and grudgingly underpaid.
This is a global phenomenon; for the impact of technology in destroying and deskilling even very highly paid jobs has been pervasive. Hong Kong, especially, has seen an influx of well-educated young professionals from overseas seeking fame and fortune in China. They have not necessarily been any more successful than the locals because they have merely added supply to the revolving door job market.
Hong Kong’s unemployment rate is the envy of the world at 3.1%. And yet there is something not quite right. Wage inflation should be rising fast under these conditions of full employment but it is running around 4% per annum, the same as inflation. There should be fewer CV’s with broken careers and overskilled staff in low paying jobs. Something is not right when government jobs around the world, not just in Hong Kong (though we make a notable example) pay significantly higher than the private sector.
There is a skill mismatch – companies cannot find the talent they want, at the age they want, at the price they are willing to pay. So while our unemployment is low, our participation rate (which includes the people who are taking a timeout and living off their savings) is also low. There are many senior professionals ‘starting their own businesses’ or ‘consulting’, some with more success than others. They have the skills required and are easily available but don’t fit for age, personality, sex, language, or ‘over’ experience.
Employment dissatisfaction is a global phenomenon made obvious by the surge in fringe and extreme politics in Sunday’s election for the European Parliament. In France, the quite far right wing Front National Party has taken 25% of the vote. The less right wing, but still opinionated, UK Independence Party scored 28%. The extreme right Greek Golden Dawn Party clocked up three seats. The far left also increased their seats at the expense of the moderates.
European elections are believed to favour extremes as they take the blame for the bad news of the day. Immigration, European regulations and the austerity that was levied on the profligate countries after 2008 have all been part of the raw emotion. Candidates that no self-respecting citizen would have running the country, receive votes.
Is it then a surprise that we have a rise in militant trade unionism in Hong Kong, mask-wearing Occupy Central protesters, or filibustering in LegCo? Public outcries about building filthy incinerators near Country Parks are our version of the European elections. Ordinary people globally are hacked off because no matter how hard they work; the owners of capital always seem many steps ahead.
In China, the leadership have their fingers firmly on this global movement and that is why in recent years we have seen a reduction in corruption, a big increase in minimum wages and a correction of past mistakes. The authorities know that they must give the people what they want to avoid European-style shifts.
The next few years will see the election of new national governments in much of Europe and indeed in the US. This groundswell of protest of educated, underemployed, skilled people will have political ramifications by impacting national and international financial policy, which will affect future markets. A great wave of change is likely to bring parties to power that will pander to popularism.
We are likely to see more regulation, more nationalism and protectionism, further attacks on high earners and owners of capital, and relaxed budgets. Governments will find some way of increasing private wages at the expense of the corporate sector. Owners of capital, who did particularly well out of Quantitative Easing will foot the bill. Stock markets will find a headwind in every policy.
This is not ardent left-wing political policy but strictly business. The business of politicians to stay in power under the influence of raw economics that inexorably moves the balance from one side to another, leaving winners and losers in its wake. Technology is allowing the people to have a voice – it is not always comfortable for the status quo.