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The Hong Kong flag and that of the Hong Kong stock exchange fly near bronze sculptures of bulls at the Exchange Square in Central on June 2. The return of bull markets and positive consumer sentiment will be crucial to Hong Kong’s economic recovery from its current woes. Photo: Winson Wong
Opinion
Opinion
by Francis Neoton Cheung
Opinion
by Francis Neoton Cheung

Hong Kong’s recovery from coronavirus and protests depends on employers joining subsidy scheme

  • City’s largest employers owe it to their employees and the Hong Kong economy as a whole to do whatever they can to ensure their survival
  • The Employment Support Scheme will give people the confidence they need to continue spending and driving the economic recovery forward
Francis Neoton Cheung
Francis Neoton Cheung
Why you can trust SCMP
Employers across Hong Kong have started applying to the government’s Employment Support Scheme. While some seem determined to make it difficult for large, well-funded businesses to participate, the economic argument is clear: all able and eligible employers should be encouraged to join the scheme as that is best for their employees and Hong Kong’s economy.
The scheme is a cornerstone of the government’s programme to shore up Hong Kong’s economy. It underpins confidence over the coming crucial months with the economy seeking to rebound from the global pandemic and local social unrest.
The scheme aims to free most of Hong Kong’s private-sector employees from the fear of losing their jobs by providing financial support to employers in return for an upfront commitment to maintain headcount over the period of the scheme. The government has earmarked HK$81 billion (US$10.4 billion) for the scheme.
It is a hefty cost if the aim is simply to help employees feel better about the future. But the scheme is not just about feeling good, though. It is about giving people the confidence to continue buying goods and services and investing in the future. The scheme is a gigantic investment in public sentiment.

Consumption needs a boost if the economy is to recover. Like other advanced economies, private consumption accounts for close to 70 per cent of Hong Kong’s gross domestic product. If a significant proportion of the workforce fears for their jobs, we will struggle to recover as fast as other regional economies. Any delay in re-establishing growth risks a fundamental and permanent impact on the city, major businesses and the livelihoods of all citizens.

There is a growing debate in Hong Kong and globally about whether larger businesses should benefit from schemes like the wage subsidy scheme. Some argue larger businesses should decline government support so more funds are available for smaller businesses that are less able to survive the downturn.

What are the facts in Hong Kong? The government says it has earmarked sufficient funds to cover all permanent employees of eligible employers, as well as 215,000 self-employed people. If an employer chooses not to participate, the funds will be unclaimed, with no guarantee that they would be diverted to smaller businesses.

Any major employer who opts not to join the scheme risks undermining the central objective of the scheme – to buoy confidence in a challenging time for all economies. The participation of businesses with large workforces and their commitment to maintain headcount is crucial for the scheme to benefit the most people and deliver the greatest boost to consumer confidence.

The scheme is designed to provide employees with the most solid ground possible for confidence in their future financial livelihoods – a government-enforced, gold-plated assurance that headcount will be maintained over the coming months. It is gold-plated because the government has warned of severe financial and reputational damage should a business accept funding and then fail to keep its staff.

The collapse of any one of Hong Kong’s larger businesses would have a devastating impact across the supply chain and the local economy. It would undermine confidence in Hong Kong when confidence in our city is already under strain.

03:41

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The most important responsibility of every business is to survive. The leaders of Hong Kong’s major businesses should not hesitate to participate in the wage subsidy scheme if doing so helps minimise their risk of failure.

Some employers may conclude they cannot commit to maintaining headcount as they need flexibility to make staff reductions to protect their business. But the returns to Hong Kong from the scheme will only be maximised if all employers who can do so participate in it. That is why all employers, irrespective of scale, financial strength or ownership structure, owe it to their employees and Hong Kong’s future economic health to join the scheme and tell their employees they have done so.

The next six months are critical for our economy. Business and government together need to do all they can to lift public sentiment to ensure Hong Kong recovers quickly and strongly as soon as conditions improve.

Francis Neoton Cheung is the convenor of Doctoral Exchange, a public policy research collective, and a former member of the Land and Building Advisory Committee

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