Diagnosis of Decreasing Labor Force Participation in Hong Kong SAR

Hong Kong SAR is facing a sustained decline in labor force participation rate (LFPR), which accelerated in recent years, driven mainly by population aging and further exacerbated by a drop in participation among youth. While the decline in youth LFPR was partly attributable to the mechanical effect of rising share of non-local students in Hong Kong SAR, it also points to postponed labor market entry among the youth which largely reflects continued education. The underlying motivations may suggest shifting job market landscape and labor skill requirements amid structural sectoral shifts, the emergence of artificial intelligence, and more intense labor market competition with increasing labor force educational attainment.