Doing the right maths on jobless numbers

PUBLISHED : Monday, 01 March, 2004, 12:00am
UPDATED : Monday, 01 March, 2004, 12:00am

'Hong Kong is undergoing economic restructuring and transformation into a knowledge-based and higher value-added economy. This together with the economic downturn since the Asian financial crisis of 1997-1998 has resulted in stubborn high unemployment.'

Matthew Cheung Kin-chung

Permanent Secretary

Economic Development and Labour

IT COULD HAVE COME straight from any of the chief executive's policy addresses bar only that Mr Cheung did not describe our prospects as a 'wing-wing' situation.

Let us correct one misapprehension immediately. Mr Cheung speaks of a downturn since the Asian financial crisis. I refer you to the red line in the first chart. It looks to me more like an upturn since the financial crisis.

But what happened to the number of jobs? The blue line at the bottom of the chart tells you that indeed they did not grow as rapidly as the economy did in real terms.

Something else did happen, however. Anecdotes to the contrary, wage cuts since 1998 were nowhere near as severe as deflation with the result that real wages have actually risen. Take the real wage index times the number of jobs and you get the green line in the chart, right in line with economic growth again. What we did in effect was trade growth in the number of jobs for growth in the purchasing power of wages.

If Mr Cheung wishes to find a culprit for high unemployment, he would do better to try such things as the natural effects of deflation, the growing reluctance of Hong Kong people to take low-paying jobs when they can do as well on social security and the fact that we let in 150 largely unemployable immigrants from the mainland every day.

But this idea that we suddenly opted for economic restructuring into a knowledge-based economy when Mr Tung took office simply does not wash. Our economy is always in the process of restructuring. Every economy is and this process is always knowledge-based. It is our brains in the end that we put to work. We are not chimpanzees.

In Hong Kong's case, we have been in a process of change from a manufacturing to a service-based economy for at least 20 years with no particular hiccup in that trend on July 1, 1997. It is on the same course that it was before except that Mr Tung has tried to steer us off course into hi-tech innovations that suit us only in his public relations literature. They have little to do with unemployment except to possibly make it worse.

But back to Mr Cheung. His concern is the education implications of a lengthy multi-department study published last year on manpower requirements. It says that by 2007, Hong Kong will have 134,000 more people than jobs for those with lower secondary education and below. It also says that there will be 102,000 fewer people than jobs for those with post-secondary education or above.

This is the way it is everywhere. There are naturally more jobs for people who learn a trade or profession than for those who do not. No one will change this and trying to make lawyers out of people more suited to driving taxis will not get you good lawyers.

But, of course, if you are going to make a study on job requirements, you must do your homework properly and the starting point for homework on anything dealing with demographics is the forecasted population growth.

If you do not get this one right, everything that follows from it will be wrong.

I refer you to the second chart. The red line shows you the official census figure for Hong Kong's population growth since 1997. As at the end of last year it was only 0.35 per cent year on year.

To put this into perspective the blue line shows you growth by natural increase alone, in other words the annual net figure of registered births over deaths. This comes in at only 0.17 per cent. The difference with the red line represents net immigration.

And now turn to the green line high up there on the right hand side of the chart. Yes, this is what Mr Cheung's study says population growth will be up to 2007, already wrong in 2003 by a full 1 per cent, even after earlier population studies were scrapped and the forecasts revised downwards.

Do it again, sir, from the beginning.