Why are Hong Kong’s Young Workers Staying Out of Jobs as the Economy Needs More Talent?

Hong Kong’s labour force participation rate fell from 61.1% in 2015 to 56.9% in 2025, driven mainly by rapid population ageing and a sharp decline in youth participation as more young people pursue higher education and delay entering the workforce. The IMF warns that economic restructuring, rising skill requirements, and AI-driven labour market changes are increasing the need for education, reskilling, and workforce reforms to sustain long-term growth and competitiveness.

Hong Kong SAR is facing a major workforce challenge as fewer people participate in the labour market, according to a new study by the International Monetary Fund (IMF) and the Hong Kong Monetary Authority (HKMA). The report finds that the labour force participation rate (LFPR) fell from 61.1 percent in 2015 to 56.9 percent in 2025, reflecting a significant decline in the share of working-age people who are employed or actively seeking jobs. While population ageing remains the biggest reason behind this trend, a sharp fall in labour force participation among young adults has emerged as an equally important concern for policymakers, businesses, and development partners.

Ageing Population Reshapes the Labour Market

The study shows that Hong Kong's population is ageing rapidly. The share of people aged 65 and above increased from 15.6 percent of the population in 2015 to 24.2 percent in 2025. Older people generally participate less in the labour market, even though participation among this group improved from 9.4 percent to 13.5 percent during the same period.

Using a shift-share analysis, IMF researchers found that demographic ageing accounts for most of the decline in overall labour force participation. Between 2020 and 2024 alone, the LFPR dropped by 3.7 percentage points. While older workers are staying employed longer, their growing share in the population continues to reduce the size of the active workforce.

For governments, the findings highlight the urgent need to support healthy ageing, flexible retirement, and reskilling programmes. Expanding childcare and eldercare services could also help increase workforce participation, particularly among women who often leave employment because of caregiving responsibilities.

Why Young People Are Staying Out of the Workforce

One of the report's most striking findings is the sharp decline in labour force participation among people aged 20–24. Their participation rate has fallen from more than 70 percent in 2005 to below 50 percent in recent years. Researchers found that this trend is largely linked to education rather than unemployment or economic inactivity.

In 2024, around 90 percent of economically inactive people aged 20–24 said they were outside the labour market because they were attending educational institutions. This was higher than the pre-pandemic average of 86.9 percent. The trend is especially strong among young women.

Educational attainment has risen significantly across Hong Kong. The share of workers with post-secondary qualifications increased from 24 percent in 2010 to 36 percent in 2025. Among youth aged 15–24, the proportion with post-secondary education doubled from 25 percent to 52 percent. The report suggests that young people are staying in education longer because employers increasingly demand higher qualifications and specialized skills.

For development partners and education agencies, this creates an opportunity to strengthen links between education systems and labour market needs. Better career guidance, vocational training, internships, and industry partnerships could help young people move more smoothly from education into employment.

Economic Transformation Raises Demand for New Skills

The report finds that Hong Kong's economy is shifting away from traditional sectors and toward high-value service industries. Since 2018, employment has declined sharply in manufacturing, retail, wholesale trade, accommodation, and food services. At the same time, jobs in finance, professional services, and real estate have expanded.

Youth employment has been particularly affected. Many of the sectors that historically provided entry-level jobs for young workers have shrunk, reducing opportunities for early labour market participation. At the same time, employers increasingly seek workers with advanced qualifications and professional skills.

Researchers found evidence that rising educational competition is influencing youth decisions. A one-percentage-point increase in the share of workers with post-secondary degrees reduces the likelihood of labour force participation among young adults by about five basis points. Model simulations suggest that youth participation between 2022 and 2024 would have been nearly 5.7 percentage points higher if educational attainment among older workers had remained at earlier levels.

For businesses, these trends signal the need for greater investment in workforce development. Companies that support apprenticeships, workplace training, and continuous learning will be better positioned to attract talent. Businesses may also benefit from stronger collaboration with universities and technical institutions to address growing skill shortages.

AI Creates Both Opportunities and Risks

The emergence of artificial intelligence is adding another layer of complexity to Hong Kong's labour market. The report finds that younger workers are more concentrated in occupations that are highly exposed to automation but less likely to benefit from AI-driven productivity gains. Women also face slightly higher exposure to these risks.

As AI adoption accelerates, entry-level jobs could become harder to find, competition for vacancies may intensify, and employers may increasingly favour workers with advanced technical and analytical skills. This could encourage even more young people to delay workforce entry while pursuing additional education and training.

For governments and international development partners, the findings point to the need for proactive labour market policies. Investments in digital skills, AI literacy, lifelong learning, and worker reskilling will be essential to help people adapt to technological change. Stronger social protection systems and active labour market programmes can also support workers during transitions between jobs and sectors.

Hong Kong's declining labour force participation reflects the combined effects of ageing, rising educational attainment, economic restructuring, and technological change. While longer education can improve human capital and future productivity, policymakers must ensure that labour market institutions, education systems, and workforce policies evolve quickly enough to meet changing economic realities. For governments, development partners, and private-sector stakeholders, the challenge is not only to increase workforce participation but also to build a labour force equipped for the demands of a more digital, knowledge-based economy.