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How can we tackle unemployment?

Sept 99

Employers' Federation view

Mr Brian Renwick, Consultant to the Employers' Federation of Hong Kong, believes the Asian Crisis was the main harbinger of unemployment.

"Figures were lower in the past because the economy continued to grow and those unemployed were easily absorbed into the market, people could easily make the transition from manufacturing industries to service industries. However, because of the recession there is no growth, and with people being the most expensive factor of business, jobs are reduced," he said.

Mr Renwick thinks the problem should sort itself out naturally as Hong Kong's economy recovers like what it did with unemployment crises in the 70s and 80s.

"The Government should continue its laisse-faire policy. The economy is self-correcting and too much interference can actually disrupt the self-healing process. The dollar peg actually causes some inflexibility, which hinders the process," he said.

Mr Renwick thinks that more accurate statistics need to be gathered before an analysis of the unemployment problem can be done.

"The picture of unemployment is based on a small sample of households. The figures gathered don't give enough detail and so the root of the problem cannot be found. In other western countries, the figure is based on a register, however because Hong Kong does not have a social security system, there is no such register," he said.

Another problem faced by Hong Kong's unemployed is the fact that Hong Kong has never been a place that is training orientated. This is needed if people are to learn and acquire new skills.

"An idea to stimulate training would be to have a levy or training tax, whereby corporations would receive a reduction in taxes if they could prove they had provided comprehensive training," he said.

Mr Renwick is confident that the economy will recover in time, and a necessary part of this process is unemployment.

"It will make us far more competitive," he said.

An academic's view

Dr Fred Kwong, Associate Professor at City University, believes the high unemployment in Hong Kong is due to the normal business cycle.

"What Hong Kong is experiencing is typical of the downward phase of the business cycle - we are in a recession," he said.

Mr Kwong said the most badly hurt people were those with the lowest skills.
But he said there is no short-term instant solution to problem the only way you can alleviate it in the future is with a long-term solution, like better education and training.

"The Government cannot really do anything tangible about unemployment except improve education in the long-term and prevent social unrest in the short-term - the short-term answer is being dealt with politically - the Government is showing interest in the unemployeds' plight - which I think is the right way going about it," he said.

Mr Kwong said unemployment is stabilising and bottoming out.

"On casual observation at shopping malls many people are carrying shopping bags this is a big difference compared to the same period last year. The economy is picking up so I expect the unemployment rate to continue to come down in next few months or so," he said.

The unemployement rate in Hong Kong, Mr Kwong said, is showing a typical asymmetrical pattern - it went up rapidly when the financial crisis hit and is coming down slow as the economy improves.

An economist's view

Mr Peter Churchhouse, Managing Director of Morgan Stanley Asia, said the Government can only tackle unemployment one way - using fiscal measures.

"The Hong Kong dollar peg ties the Government's hands and prevents them using monetary measures. With the peg in place the Government cannot manipulate interest rates to stimulate the economy," he said.

Fiscal measures include direct spending in the economy on infrastructure, training and education that would directly influence employment prospects.

"The latest numbers indicate that unemployment is a bit down and the economy is doing less bad, but we are still not in positive GDP growth. We might see that in the fourth quarter of this year," he said.

Mr Churchhouse said that the decline in the retail sector has stabilised and blood letting from the financial services sector has been arrested. However on the export/shipping side there is still not much improvement.
Mr Churchouse said, at present, the peg's good for Hong Kong, despite preventing Government from lowering the interest rate to stimulate the economy.

"If we dropped the peg we would run lots of risks because Hong Kong is inextricably linked with China and their currency is not yet convertible," he said.

Government's view

Mr Matthew Cheung, Commissioner of Labour, believes that Hong Kong is going through a structural reform in the wake of the unemployment issue and that current rates of unemployment will stay with us for some time.

"We are going through a difficult period due to the Asian financial crisis. However, the worst is bottlenecking out and we are on the road to recovery. It is the second month in a row in which the unemployment rate has dropped," he said.

Mr Cheung warned that we should not be too excited about this figure, as it means one in 10 people in the workforce are still unemployed and there are 100,000 underemployed.

"There has been much speculation that the true extent of unemployment is worse, due to the fact that inactive job seekers are not included in the figures. This is unwarranted as the methodology used is in line with international standards," he said.

With almost $200 billion going into infrastructure works such as the West Rail, the MTR extensions and the Cyberport project, many jobs will be created for the short, medium, and long-term.

"A great thing about these projects is that we actually need them, and unlike other countries, it is not just to keep people in a job."

Youth unemployment is a particularly severe problem, reaching 23 per cent in the first quarter of 1999.

"Young people are disadvantaged because they lack experience, and when corporations are laying off experienced staff they are not going to hire inexperienced youths," he said

The Government is mounting a full-scale community effort to provide training and work experience for young school-leavers starting this month.

"We are busy drumming up support from all sectors to take on these young people for one or two months. It will cost them nothing and the youths will be paid an allowance from the scheme of $1,000 a month," he said.

Mr Cheung disagrees that short-term (less than a year), programmes don't work.

Mr Cheung says if the programme is focused and in keeping with market needs, they should work.

Mr Cheung said the Employment Service of the Labour Department has been improved to cope with unemployment. Now there is a new Telephone Employment Service Centre; a one-stop Job Vacancy Processing Centre and an Interactive Employment Service Web site.

On the controversial topic of importation of labour Mr Cheung believes it is necessary to import labour for specific sectors such as the proposals made in the 16-point plan for the revitalisation of the textiles and garments industries. However the Government has not yet formally responded to this.

"There are still jobs where there are no takers - if this is the case we must import labour to maintain our competitiveness," he said.

Mr Cheung said imported labour requirements needed to fulfill special criteria first.

"Obviously the jobs should be offered to Hong Kong people first, and it should be demonstrated that after this search the skills are not available locally and that wages should be comparable to existing local rates," he said.

Trade Unions' view

With the unemployment rate being one of the highest for over 20 years Mr Lee Cheuk-yan, Legislative Councillor and General Secretary for the Hong Kong Federation of Trade Unions, believes the problem is a structural rather than a cyclical one.

"Hong Kong is now a mature economy - but we have a big group - 1.3 out of 3.3 million unskilled workers with limited education (up to Form 3). There is simply not enough industry to absorb these workers.

"With the economy's maturation and, indeed, the Government's initiative, there is a growing need for highly skilled, knowledge-based workers * herein lies the problem," he said.

Mr Lee said when the economy is good, there is high consumption, so unskilled workers find jobs as cleaners, car park attendants and shop assistants etc, but these jobs are reduced when the economy hits choppy water.

"This polarised workforce is very bad for the future of Hong Kong. With our high-cost structure we need a value-added economy and workforce," he said.

Mr Lee added the dollar peg was also eroding the competitiveness of the economy, because it caused inflexibility and prevented cost adjustment.

"Government policy could do better to stimulate the economy. They should invest in infrastructure - not just the hardware - but also social infrastructure -  elderly care, child care and social services - more jobs would be created by this," he said.

Mr Lee said more comprehensive training and re-training programmes were required to encourage life-long learning.

"The private sector needs to understand this - in Hong Kong employees spend very little on training and re-training," he said.

Mr Lee said that each year about 40,000 students fail all subjects in the HKCCE examinations, and these underachievers were the forgotten generation.

"The education system is all wrong - it is too examination orientated and only benefits the elite. Many students are frustrated and would prefer a more practical and creative approach to learning. If Hong Kong wants to become a technological innovation hub creative learning is required," he said.

Mr Lee said another harsh reality from the downturn was discrimination particularly against sex and age.

"Many middle aged workers can simply not find a job," he said.