Macau labor shortage seen as hurdle for casino expansion

HONG KONG — Macau’s $34 billion gaming industry has an obstacle. With 28 million visitors and 21 percent economic growth last year, Macau is confronting a severe labor shortage.

The Chinese city, one of two of the country’s special administrative regions along with Hong Kong, is the world’s largest gambling hub by revenue and is close to full employment.

As a result, casino operators such as Las Vegas Sands, Wynn Resorts and Hong Kong-traded Galaxy Entertainment are having trouble finding workers as they seek to draw more of the Chinese tourists who drove gambling revenue up 42 percent last year. Rules requiring firms to hire from Macau’s population of about half a million are driving up wages and have casino operators competing for card dealers, construction workers and executives.

“It’s a challenge everybody faces,” said Edward Tracy, chief executive officer at Sands China. “You have a base population of 500,000 and an unemployment rate of 2.1 percent. That 2.1 is almost zero: those people are probably not looking for a job.”

Joblessness in the former Portuguese colony is at the lowest since Bloomberg began tracking the data in 2002. It contrasts with the 15 percent monthly unemployment rate in Portugal, 8.1 percent in the U.S. and Spain’s 24 percent.

The rules not only make it harder to hire staff, they also contribute to a rise in wages, though casino profits aren’t suffering.

At Sands China, for example, the Asian unit of billionaire Sheldon Adelson’s Las Vegas company, profit rose sixfold in the three years through 2011. Tracy says a big worry is the 4,000 positions he’d like to fill.

In December, average earnings, excluding bonuses and allowances, of full-time employees rose by 6.5 percent in the gaming sector to 16,720 patacas ($2,090), according to government data.

The gambling industry’s need for more workers, however, has hurt small businesses such as restaurants by forcing them to raise wages to compete with the casinos, said Fung Kwan, head of the economics department at the University of Macau.

“Labor shortage has been an ongoing problem for Macau,” said Kwan. “The recent casino developments have exacerbated the problem and we’ve seen the casinos nabbing labor from other sectors. Labor cost for the whole of Macau is rising.” Gambling revenue represented about 40 percent of Macau’s gross domestic product last year, he said.

At the baccarat table in the Venetian Macau, a dealer who said she goes by the nickname Ah Fong said her monthly salary of 20,000 patacas is more than double the amount she used to make as a waitress.

“Only Macau residents are permitted to work as dealers, so there’s a huge demand for us,” said Ah Fong, 46, who switched careers from waitressing about four years ago.

“It offers good money,” she said. “Even my son, who is now 14, wants to become a dealer when he finishes school.”

The competition for labor is set to increase. Wynn Macau Ltd., gaming magnate Steve Wynn’s Hong Kong-listed unit, this month received the go-ahead to build a second casino resort.

Galaxy, the casino operator that more than tripled earnings last year, plans to invest $2.1 billion to double the size of its resort in three years. Adelson opened the first phase of his Sands Cotai Central casino in April and that resort will add 4,000 hotel rooms and 200 gaming tables over the next year.

“The shortage of labor will be exacerbated when the new resorts come online, particularly with respect to positions that can only be filled by Macau residents,” said Grant Govertsen, a Macau-based analyst at Union Gaming Group. “This will put further upward pressure on wages.”

Macau, 37 miles southwest of Hong Kong and half the size of Manhattan, is the only place in China where casino gambling is legal.

The city has been benefiting from a jump in economic growth and job creation since opening its gaming industry in 2001. It has a population of a little more than half a million and a work force of 346,000.

Some jobs, such as those of casino dealers, can be held only by local residents. Companies must get approval from the governor before hiring a non-resident worker, according to Macau’s Labor Affairs Bureau.

For approval, companies must ensure that salaries of local workers won’t be affected upon the employment of foreign workers and the proportion between resident and non-resident workers must be “acceptable,” according to the guidelines. Sands China has more than 22,000 employees and 6,000 of them are from outside Macau, according to Melina Leong, the company’s vice president for public relations. Sands China raised employee wages by about 6 percent last year.

One hope is the Macau government will loosen restrictions on foreign hiring to help the industry sustain growth. Macau’s local labor force is not sufficient to cope with the recent projects, Kwan said.

“There’s a political process that has to happen,” said Sands China’s Tracy. “My belief is, as long as we develop the next one or two projects, we’ll begin to see some relaxation.” Galaxy Deputy Chairman Francis Lui said Tuesday that he expects the Macau government may consider raising the foreign labor quota.

“The current unemployment rate of 2 percent in Macau is very healthy,” said Lui. “As there will be a lot of large infrastructure projects coming online, the government may soon come up with a solution to accommodate the need for labor.”