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Chill wind blowing - MSS in Macau Business

 Despite layoffs by the junket operators, the overall labour market in the city remains stable with the imminent opening of several new resorts but bosses remain more cautious

By Tony Lai

Since being laid off by a local junket operator in March, Lei Kuok Keong has been idling at home. The family has so far been supported savings and his wife, who also works in a casino. But Mr. Lei – like hundreds of employees let go by junket operators in recent months as the gaming industry here was battered by the anti-corruption campaign in Mainland China – is in no particular rush to find a new job.

“Most of us want to wait and see how the market fares,” said Mr. Lei, who is also vice-president of gaming workers’ union Forefront of Macau Gaming. “Our vocational skill is our experience. If we switch to other career paths, we need to start over and our incomes will be significantly less compared with what we used to have.”

But Mr. Lei said they are not optimistic, as the casinos here show no sign of recovery. A 16-month losing streak in gaming revenue as of September led to a slump of 25.4 per cent in the Macau economy in the first half of this year, a whopping decline that promted financial news service Bloomberg to controversially trumpet earlier in the year: ‘Forget Greece, Macau is World’s Worst Performing Economy’.

The claim is overblown as observers and businessmen foresee labour demand will remain stable with several new integrated gaming resorts opening in the next two years. But workers will have fewer choices than they used to as the labour market has become less candidate-driven with bosses across different sectors being increasingly cautious in controlling headcount during the economic downturn.

The Labour Affairs Bureau said in a statement that 61 employees laid off by nine VIP rooms in casinos had sought help between December and mid-September. But analysts and labour unions have indicated the actual size was bigger as many people working for the junket operators did not have formal contracts and were reluctant to seek help. The Forefront of Macau Gaming estimates at least 3,000 workers has been sacked following the closure of numerous VIP rooms since the end of last year.

Not only those employed by the junket operators are worried about losing their job. The city’s six gaming operators were under pressure last year after employees held numerous protests, assemblies and petitions demanding better pay and benefits and berating employers about imported workers. The Forefront of Macau Gaming alone was behind nine protests last year in addition to a couple of petitions, assemblies and industrial actions. It’s a completely different picture this year with the union organising only one protest in May with a few petitions. A newly established labour group, Gaming Employees Advance Association, even petitioned gaming operators in September to allow some workers to work five days a week instead of six so that companies did not need to lay off excess staff.

Six-year low

Leong Sun Iok, vice-president of the Macau Federation of Trade Unions, the city’s largest labour union, which has several affiliate groups of gaming workers, described staff morale in the gaming industry as “somehow worrying”, although the gaming operators have not signalled any move to cut staff like they did when hit by the global financial crisis in 2008-09. The latest unemployment rate in the city remained at a low 1.8 per cent as of July with employees in the gaming and recreational services representing 23.6 per cent of the total employed population, government figures reveal.

“The human resources demand by the gaming industry has slowed; in particular, croupiers, as gaming operators look for means to cut costs amid the headwinds,” he said. Latest official data shows the vacancy rate in the gaming sector stood at 0.9 per cent in the second quarter of this year, the lowest since the fourth quarter of 2009. The recruitment rate – the number of new employees versus the total employee size in the gaming sector – was 3.5 per cent in this year’s second quarter, slightly up from 3.4 per cent in the fourth quarter of 2014, which was the lowest since end-2008.

“Some gaming operators have gauged whether casino workers like croupiers would switch to jobs in non-gaming areas but many are reluctant to do so: only residents can become croupiers as protected by the government’s policies while it’s not the same in other sectors. There are risks,” Mr. Leong said. Earlier this year, Sands China Ltd. launched a six-month programme whereby employees could work in different non-gaming departments within the operator’s integrated resorts – a programme that the company said was well received by workers.

Apart from moving casino workers to non-gaming areas, two operators have set the retirement age for some workers at 60 to curb costs, according to the Macau Gaming Enterprises Staff Association, which did not identify the operators. “Under the current conditions of the labour market, 60 is not really old,” Choi Kam Fu, director-general of the union, said. “It is a very irresponsible practice in view of the fact that [the gaming operators] are still making lots of money. If they want to cut costs, they should first lay off non-resident workers.”

“Cost-cutting measures have intensified in the last six months after [gaming] companies realised that some of the revenue losses are permanent,” said Morgan Stanley analysts in a mid-September report. Despite staff costs accounting for 60-70 per cent of total operating costs of the gaming operators excluding tax and junket commission, the analyst team led by Praveen Choudhary highlighted the companies had so far only squeezed their advertising expenditure due to their “inability to cut local staff”.

New projects

Jack Chang Chak Io, vice-president of the Macau Association of Economic Sciences, said: “I don’t see the possibilities of a massive layoff as the administration is conducting a mid-term review of the gaming industry which is linked to the renewal of the gaming licences and there are new projects to be opened in the coming years. It’s a more likely scenario that there will be an adjustment in the labour force through natural attrition.”

Macau’s Chief Executive Fernando Chui Sai On said in August that the mid-term gaming review – completed by year-end – would look into the operations and social responsibilities of the city’s six gaming operators, whose concessions or sub-concessions will expire by either 2020 or 2022. In a recent meeting with the gaming executives in September, Secretary for Economy and Finance Lionel Leong Vai Tac called for the large companies to “shoulder more social responsibilities,” and work together with their employees to “overcome the hardship,” and “safeguard the employment of local workers.”

Against the background of the relentless gaming decline, at least six more integrated gaming projects are scheduled to open within the next 24 months. With Galaxy Entertainment Group Ltd. opening two adjoining properties – Phase II of Galaxy Macau and Broadway Macau at the end of May – rival Melco Crown Entertainment Ltd. is hard on its heels with the inauguration of its Studio City project on October 27.

Macau Business asked Melco Crown about the number of new staff it has recruited to man the operation of the new project – its executives previously stated Studio City required 8,000 to 10,000 extra staff – but received no reply before press time. Galaxy Entertainment Deputy Chairman Francis Lui Yiu Tung said in the summer of last year that the two new properties would boost its workforce by 8,000 workers but its interim reports show that the employee size only expanded by 6,000 workers as at end-June.

“It’s pretty interesting how things have evolved over the past year. Not long ago we were talking about a severe labour shortage but we’re now talking about excess staff,” said a casino industry source. Besides the sluggish performance of casinos, the fewer than expected gaming tables the government has granted to new projects has also dampened labour demand, the source said, adding that gaming operators would transfer the excess staff in existing properties to new projects to keep the expansion of employee size under control.

Galaxy Entertainment was only approved for 150 new gaming tables for Galaxy Macau Phase II despite its capacity to accommodate 500 tables, as the Macau Government capped the compound annual growth of new tables to 3 per cent for 10 years until 2022. The government has yet to announce the number of tables Studio City or other new projects will get but analysts believe the actual number will be less than the operators have requested.

Work harder

“The sentiment in the labour market is not as pessimistic as one might think during an economic downturn – companies will still hire if they see the need but they will pay more attention to controlling the expansion of headcount,” says Jiji Tu, managing director of MSS Recruitment Ltd. “Some staff recently laid off by the junket companies have been absorbed by the retail industry with some shops expanding their footprint here.”

But employees were “more careful” about switching jobs and “less aggressive” in terms of salary and benefits, she added, saying she expects the labour market to remain stable in the near future.

Amid the economic woes, local small and medium-sized enterprises (SMEs) are breathing a sigh of relief. “Even though there are several new integrated resorts to be opened, fewer workers have been poached from us compared to the past when the new projects opened,” said Daniel Iong Ieng Chun, vice-president of the Macau Small and Medium Enterprises Association. “In other words, our human resources have been relatively more stable.”

But many SMEs have no intention of recruiting more personnel at the moment as their business volume has also suffered from the economic downturn. “Some are starting to think about cutting costs but they are worried that if they let go the imported workers now they have to wait for a long time to get them back when business starts to pick up again,” Mr. Iong added.

While fewer workers leave the SMEs for casinos, this does not mean that residents will choose a job with the SMEs in the first place. “It’s been easier for us to find part-time employees recently as many students looked for jobs during the summer holidays but it’s still difficult for us to recruit full-time employees,” said Fong Kin Fu, president of SME group Federal General Commercial Association of Macau Small and Medium Enterprises.

“Most of the positions we offer cannot attract residents and have to be filled by non-residents,” he said. Non-resident workers totalled 118,600 in the second quarter, accounting for nearly 30 per cent of the employed force.

Looking ahead, Mr. Chang of the Macau Association of Economic Sciences believes the territory’s unemployment rate could increase slightly as the economy is still undergoing an adjustment period with the possible loss of workers in sectors like junket operators and construction companies.

“Even though it may rise to 2-3 per cent, it is still considered to be full employment in economic terms,” he said. “There will still be jobs in the market with the ongoing development of Macau – but residents will surely have fewer choices and will have to work harder.”

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Salary Freezes

While workers may not need to worry about losing their job despite the territory’s economy plunging by more than a quarter, a salary hike seems to be unlikely at the moment.

“With the ongoing declines in gaming revenue, I don’t see companies have room to hike salaries,” said Jiji Tu, managing director of MSS Recruitment Ltd. “The salary level across different sectors is expected to stay put [in the near future].”

As casino revenue has fallen for 16 months in a row as of September, the Federal General Commercial Association of Macau Small and Medium Enterprises says some small businesses saw revenues plunge by as much as 30-40 per cent. “Most companies will surely freeze salaries for their workers under these economic conditions,” said its president Fong Kin Fu.

Official figures show the median monthly employment earnings for the city’s labour force stood at MOP15,000 in this year’s second quarter, rising MOP2,000 from the previous year but remaining unchanged from the previous quarter. The median earnings of residents were MOP17,500 in the second quarter, up MOP2,500 year-on-year but down MOP500 from the first quarter.

The city’s largest employers – the gaming operators which employ nearly a quarter of the territory’s labour force – have yet to indicate whether there will be a salary hike next year, as they usually adjust the salary level of their employees at the beginning of the year. But Galaxy Entertainment Group Ltd. announced a salary freeze in August for all its senior executives as part of its ‘cost control initiatives’ amid the gaming slump. The company controlled by Hong Kong tycoon Lui Che Woo did not reveal further details of the initiatives.

However, Morgan Stanley analysts think gaming operators will cut costs in other areas like advertising expenditure rather than staffing costs. “Galaxy has announced a salary freeze for senior management but we think wage inflation is inevitable in future unless the companies become loss-making,” the analyst team led by Praveen Choudhary wrote in a research report in September. Gaming workers have enjoyed an annual salary hike of about 5 per cent in the past three years.

After average monthly gaming revenue fell below the red line of MOP20 billion in the first eight months of this year, the Macau Government has enforced Macau-style austerity measures since September to save some MOP1.4 billion for the current fiscal year. In spite of the cost control measures and the gloomy economic outlook, civil servants still want a salary rise next year.

The Macau Civil Servants Association, headed by legislator José Pereira Coutinho, wrote to the city’s Chief Executive in September that the government should continue increasing the salaries of civil servants in 2016 given soaring housing prices and consumer prices, although the group did not specify the extent of the increase. The city’s public workforce was given a 6.76 per cent salary increase in January.

The Professional Civil Servants Association of Macau proposed in July that over 32,000 civil servants should enjoy a 5 per cent salary hike next year, or an increase from MOP79 to MOP83 a point in salary index. The government only responded that they would consider the salary level of civil servants based on the morale of the workforce, the public finances of the government, and socio-economic conditions.

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