Chief Executive John Lee Ka-chiu was reported as saying that with the high living costs in the Hong Kong Special Administrative Region, the city’s competitiveness is at risk. He promised to study what could be done to reduce costs and to restore the city’s competitiveness.

According to Mercer’s Cost of Living City Ranking 2024, Hong Kong is ranked at the top, followed by Singapore, Zurich, Geneva, and Basel. There is, however, no cause for envying cities with low cost of living rankings. Mercer’s rankings are intended to “provide the essential information needed to design efficient and transparent compensation packages for international assignees”, which means that the cost of living is based on the experience of expatriates, not locals.

According to HappyHongKonger.com, Singapore’s cost of living is some 8 percent higher than that of Hong Kong, mainly because its housing costs are higher. It cited CNBC, which reported in 2023 that Singapore had overtaken Hong Kong as the most expensive Asia-Pacific city for private homes.

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Interestingly, despite high costs, Singapore keeps growing faster than Hong Kong, and it keeps its competitiveness by massively importing labor, largely from low-income countries. Singapore also protects the interests of local workers and does so very intelligently. First, employers that import foreign workers must pay their local workers at least a “local qualifying wage” or pay “progressive wages” as prescribed for different sectors and occupations reflecting their skills and productivity. Second, the Singapore government sets imported worker “dependency ratios” for different industries. Imported workers must not exceed what is permitted according to the dependency ratio. Finally, the Singapore government levies a monthly labor importation fee for each worker imported. 

Singapore does not have a minimum wage, whether for locals or for imported workers. This levy varies from sector to sector and with the nature of the job. Employers of foreign domestic helpers need to pay 300 Singapore dollars ($234) for the first worker and 450 Singapore dollars for the second worker and up. Singapore does not set an overall quota for imported workers. It simply imports as many as are needed, subject to the requirements for levies, local qualifying wages, and dependency ratios. As of December 2024, Singapore had a total foreign workforce of 1,576,500 according to the Ministry of Manpower.

To date, Singapore still maintains a share of manufacturing in GDP at over 20 percent, which is 20 times that of Hong Kong. This is by design, and made possible because it has aggressively created industrial land and imported foreign workers. In Singapore, the manufacturing sector’s dependency ratio ceiling is 60 percent, meaning that up to 60 percent of a company’s employees can be foreigners. Singapore had around 350,500 manufacturing workers in 2024, so at least 40 percent — about 140,200 — of this workforce were Singaporeans. It is important to note that without the imported workers, the manufacturing jobs available for Singaporeans would have certainly been much lower. Thus, imported workers are complementary to, rather than substitutes for, local workers.

I discuss Singapore’s labor importation program with these details because it offers great lessons for Hong Kong in the development of the Northern Metropolis. Singapore does not have competitively priced manufacturing wage rates but can hire from lower cost countries. Singapore does not require employers to pay imported workers’ wages that match those of local workers as does Hong Kong. The Singapore government does not set specific quotas and instead sets local qualifying salaries and protects local workers by telling employers: If you do not pay these qualifying salaries to local workers you cannot import workers. The Singapore government smartly sets dependency ratios so that there are no fixed quotas to be reviewed regularly. 

Nonlocal workers of course prefer to work in Hong Kong because it requires employers to pay no lower than the median salary paid to local workers. This means to nonlocal workers, Hong Kong offers a huge wage premium compared with what they can get at home. This huge difference allows much room for recruitment agencies to exploit to increase profits and for Hong Kong employers to exploit to lower costs. Singapore plugs the hole by charging heavy levies.

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For manufacturing, Singapore charges a monthly levy of S$250 for high-skill foreign workers and S$370 for low-skill foreign workers. The difference reflects the fact that the gap between local and home wages is the biggest for low-skill jobs. As an employer hires foreign workers closer to the maximum that is allowed according to the dependency ratio, the levy rises, reaching S$650 and S$550 per month for low-skill and high-skill workers respectively.

We can see that Singapore maintains its manufacturing competitiveness by making plenty of land available and plenty of imported labor available. It is able to attract top players to invest heavily in Singapore. I am hopeful that with the Northern Metropolis project, Hong Kong will be able to truly diversify its economy. For too long, Hong Kong was beholden to the “big market, small government” dogma. I am hopeful Hong Kong has turned a new page in its development. That is why I called the project “transformative” in my previous article.

The author is an honorary research fellow at the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University, and an adjunct professor at the Academy for Applied Policy Studies and Education Futures, the Education University of Hong Kong.

The views do not necessarily reflect those of China Daily.