The Unemployment Rate

Introduction

The unemployment rate became a hot topic in the past few months when it rose to
3.5 per cent, a recent high for almost 10 years. The jobless rate was higher
than the 3.2 per cent unemployment rate recorded in the May to July period. The
underemployment rate in the June to August period rose to 2.5 per cent from 2.3
per cent in the May to July period. Until recently, most workers who lost their
jobs were from the manufacturing sector. They were middle-aged factory workers
with few skills and little education. But in recent months a large number of
employees have been laid off in the retail and restaurant businesses.
Unemployment has spilled over to the service sector from manufacturing sector.
Hong Kong is facing a prolonged economic downturn.

The high unemployment rate has raised many social and economic problems. For
example, the number of people who commit suicide is increased. It is because
more people had lost their jobs for a long time. It is a serious threat to the
lives of the poor. The unemployed people may also feel that it is unmeaningful
to live. As a result, they will commit suicide to solve the problem. Moreover,
the high unemployment rate results in the increase of the rate of crime. There
was an unemployed man who stole rice because he was too hungry and he did not
have money to even buy food! We can know how serious the unemployment rate is.

By the way, higher unemployment rate causes lower purchasing power of people. A
lot of kinds of business are affected. Many people lose confidence in economics
of Hong Kong. They do not believe unemployment will be improved. Some say that
the Government should provide immediate assistance for the jobless. Some also
say unemployment is due to the attraction of cheap labor across the border. The
Government can no longer play the role of a bystander.

All of these above show the influence of the unemployment. In spite of how many
people who have talked about the topic of unemployment, everyone will be
concerned about this topic. The following sections will analyze this hot topic.
Reasons for unemployment in Hong Kong

1. Faster growth in total labor supply relative to that of total employment

In 1993 and 1994, the increase in Hong Kong labor force is 2.9% and 3.5%
respectively. At the end of 1993, the total labour supply is 2 970 000. Change
in the total labour supply is determined by the population growth, total
employment and the emigration condition. If the population growth and the total
employment is stable, the extra labour supply will increase the total labour
supply. This extra labour supply are mostly from the influx of illegal
immigrants from China, imported labour ( 30,000 ), hiring of expatriates ( net
increase is 40,000 from 1992 to 1994 ) and the returnees from overseas. Thus,
the supply of labour is greater than the demand and gives pressure on employment.
From March to May of 1995, the total labour supply had risen 4.4% but the total
employment had just increased 3.6%, so this aggravated the unemployment rate.
However, this is just a superficial reason. The following reasons can explain
the reason of unemployment in a deeper way.

2. Change in the economic structure

The economic structure in Hong Kong has changed from labour intensive to high
technology and large capital intensive. Also, it changes from manufacturing
oriented to service oriented industries. Therefore, the manufacturing factories
move to China for cheap labour. From 1988 to 1994, there are 60,000 jobs lost
each year. Of the total employment of different sectors, the portion of the
manufacturing industries drops from 27.4% in 1990 to 17% in 1994. Many labour
are released from the manufacturing industries. Though there are a great demand
of labour in the service sector, many of the unemployed still cannot find their
job because of job matching problem. They do not have the skills demanded in the
job market, so there are both a lot of vacancies of jobs and a lot of unemployed
labour. This kind of unemployment is called the structural unemployment which is
a kind of involuntary unemployment.

3. China Policy

Recently, the Chinese government tries to control the economy by macro policy
such as implementing the contractionary monetary policy , inflation control
policy. This leads to the slow down in the Chinese economy. The flow in of the
Chinese capital to Hong Kong for speculation and investment reduce. This affects
Hong Kong\'s economic growth simultaneously.

In the past, the prosperous China-Hong Kong trade motivated the purchasing power
in the service sector