Terminology masks our structural inducements to redundancy

IT SEEMS TO me that many people are confusing the terms 'structural adjustment' and 'structural unemployment' when talking of the prospects of getting Hong Kong's unemployment rate down further.

Structural adjustment is a term much beloved of our Chief Executive. He uses it to mean that Hong Kong is in the process of making a transition from a manufacturing economy to one that is service-based and this inevitably causes some dislocations that trouble us. His message boils down to 'not my fault'.

We shall leave aside that this transition, although a fact, is a fact of the past. We have made the transition. We may still have some manufacturing left but every service economy does. We do not have to wipe out every manufacturing job before proclaiming the transition complete.

It will not do, however, to blame our high overall unemployment rate on this structural adjustment. As the chart shows, the unemployment rate in manufacturing (the blue line) has been pretty much in line with the overall unemployment rate (the red line) over the past eight years. It has been higher recently but this may not be statistically significant.

What has happened here is that in 1993 (the first data I have on record), we had more than 600,000 people employed in manufacturing while we now have only 220,000. But unemployment in manufacturing over this period rose from 15,000 to about 18,000 people.

In other words, manufacturing has lost 380,000 jobs but with only 3,000 more people unemployed. It should be obvious from this that we have actually made a very smooth structural adjustment here in the size of the manufacturing labour force.