HK Should Brace For More Mass Layoffs, Says Scholar

A scholar said on Thursday that more mass layoffs by the end of the year could push Hong Kong's unemployment rate to seven percent, or 0.6 percentage points higher than the current level.

Simon Lee, from Chinese University's business school, said a wave of sackings is very likely to take place after November, when the government's wage subsidy scheme comes to an end.

Firms can't cut jobs if they receive the subsidies. But Lee said companies will likely need to downscale their operations.

"They just can't see the end of the tunnel....originally they thought that the situation would be better in the later part of this year. But the situation remains the same," he told RTHK.

"From the companies' point of view...the best way to reduce their operating costs and to survive is to sack the staff. If they can downscale their operations, they can survive a little longer, same as Cathay Pacific."

Lee said layoffs by many small to medium-sized companies could push the unemployment rate up by 0.2 to 0.3 percentage points, and if things don't improve, he expects overall unemployment to rise further to 7 percent by early next year.

He said he expect firms will want to improve their financial statements, so the axing of jobs could come before the end of December, or the end of the financial year next March.

This week, the government announced an unemployment rate of 6.4 percent, the highest in 16 years. It reached 8.7 percent in the middle of 2003, soon after Hong Kong was hit by the Sars epidemic.