The Economic Impact of Foreign Domestic Helper Salaries

Foreign Domestic Helpers (FDHs) have become a common sight in Hong Kong households over the years. Many families rely on FDHs for domestic work such as cooking, cleaning, and childcare. With a minimum wage of HK$4,630 per month and other mandatory benefits, many people wonder about the economic impact of FDH salaries. This blog post explores the economic impact of foreign domestic helper (外傭) salaries on both Hong Kong and the countries of origin of these helpers.

FDHs make up a significant portion of Hong Kong’s workforce. In 2020, there were over 390,000 FDHs in Hong Kong, making up 9.7% of the total workforce. One of the most significant economic impacts of FDH salaries is the multiplier effect. The money they earn is spent on food, accommodation, and other essentials, generating income for local businesses. According to the Hong Kong Monetary Authority, the money spent by FDHs contributed to 1.3% of the city’s GDP in 2018. The multiplier effect shows that the income generated by FDHs goes beyond their salaries and helps the local economy.

On the other hand, FDHs come to Hong Kong from various countries in Asia, including the Philippines, Indonesia, and Thailand. The salaries they earn are typically higher in Hong Kong, even when adjusted for the cost of living. The money they earn and subsequently send back to their families in their countries of origin helps to boost those economies. In 2020, the Philippines received over HK$30 billion in remittances from FDHs in Hong Kong. This amount is significant for the country’s economy as it contributes to 9.7% of GDP and 8.3% of its gross national income.

Another economic impact of FDH salaries is their contribution to the social security system. Employers of FDHs are required to pay mandatory contributions to the Mandatory Provident Fund, which is a retirement scheme in Hong Kong. According to the Mandatory Provident Fund Schemes Authority, the total contribution by employers of FDHs was HK$2.3 billion in 2019. This contribution helps to reduce the burden on the welfare system, and the money is used to invest in different funds to attain long-term gains for the retirement needs of the employees.

Moreover, FDHs help to avoid skills shortages in Hong Kong that may have led to higher labor costs for businesses. FDHs fill various roles, including jobs that require specific skills such as elderly caregiving. Without FDHs, many families and businesses would need to pay higher wages to local employees to fill those roles. As a result, the cost of living would be higher, leading to an adverse impact on the local economy.

Conclusion:

In conclusion, FDHs’ salaries in Hong Kong have a significant economic impact on both Hong Kong and their countries of origin. Their salaries lead to a multiplier effect that benefits the local economy, and the money they send back to their families contributes significantly to their countries’ economies. Moreover, their mandatory contributions to the social security system reduce the burden on the welfare system and help investors gain long-term benefits. Lastly, FDHs fill various roles, thereby avoiding skills shortages that may have led to higher labor costs for businesses. The presence of FDHs in Hong Kong has a significant economic impact that benefits various stakeholders, including the local economy, businesses, and FDHs and their families.