HK won't raise another Jackie Chan

Apart from the brown tap water and the oil fish at home that might make me sick, i shouldn't worry about the society's polarization of income distribution that, skeptics said, affects the job opportunities. The phenomenon of so-called "M-shaped Society" is the mere consequence of the fact that people walk different paths of life. The older they get, the broader divergence of achievements it is possible. That actually happens in Hong Kong as the baby boomers who were born in 1950's and 1960's. The reason the skeptics blame the "M-shaped" phenomenon for the seemingly narrowed job opportunities is that, i believe, the "M-shaped" phenomenon emerged coincidently with the buoyancy of unemployment. The skeptics are barking up the wrong tree.

Yes, unemployment statistics has been disappointing although the economy has been expanded uninterruptedly for the past four years. The current jobless rate of 4.1% means that for every 1,000 people who are either working or waiting for jobs, 41 are now without job. The number considerably exceeds the average 37 over the past 25 years. In the heyday 1982 to 1997, only 25 people on average were jobless. The number hit a historic low of 11 in 1989. Now, at 4.1%, the unemployment rate has fallen significantly from the peak but the decline has flattened. Why?

Economic cycle cannot explain the prevailing unemployment. Is it structural? The government would be happy to agree and reiterates its old tale that Hong Kong has transformed from a manufacturing town to a service-oriented city. The government likes to say that workers who are laid off from factories remained unemployed and that has limited the decline of unemployment rate. The tale suggests that the prevailing unemployment is something irreversible, and the government can hardly do anything about it. However widely cited it is, the tale is false.

The chart on the right (Source: Hong Kong Government) nails the lie.

This chart shows the unemployment trend by age group since 1982. All lines go hand-in-hand, up and down together. The unemployment among workers aged between 50 and 59 has been high in recent years. But the fact is that all age groups, young and old, have soared. If it were structural unemployment that dictated the overall unemployment, one would expect to see the older people, the green line and the orange line, suffer and the others do not. If it were structural unemployment that causes the whole unemployment problem, the jobless rate among the younger people, represented by the red line and the light blue line, should be low. But that is not the case.

The highly consistent pattern across ages suggests that structural changes have played a minor role, if any, in explaining the whole employment problem. There must be some underlying force that affects all workers, young and old.

Apart from "M-shaped" phenomenon, Hong Kong's social welfare has risen coincidently with the rise of unemployment rate.

See the chart on the right (Source: Hong Kong Government) and you will find changes in jobless welfare ground-breaking.

The red line in the chart shows expenditure of Comprehensive Social Security Assistance (CSSA) Scheme since 1994. The black line shows the number of recipients. The expenditure fifth-folded to HK$17.6 billion in 2004, from HK$3.4 in 1994. The number of recipients increased to 542,000 from 140,000 during the same period. How large is the group of recipients? The number of recipients in 2004 was more than double the number of unemployed people.

How much does the scheme pay as compared with an employer? According to official statistics, an eligible family of three members on average received HK$7,700 a month in the year ended October 2005. A single-member family got HK$3,500 a month.

A cleaning worker earns about HK$3,000 to HK$5,000 after one whole month of hardship. He loses almost all his leisure time and probably spends most of his saving in medical expenses due to the infectious working environment.

The welfare system gives incentive for people not to work. i believe that is the major cause for the prevailing unemployment problem.

Unemployment driven by the welfare hurt the economy harder than cyclical and structural causes do because it tends to stay for a long period of time and affect all workers, young and old. Today's stagnant French economy is an example.

Taxpayers are worse-off. More importantly, the society loses a group of workforce. Small businesses cannot recruit unskilled workers. In the past, small businesses such as textile, jewelry and spectacle companies provided on-job training for young workers, giving rise to a group of innovative talents. For instance, the bosses of listed companies, Shenzhou (2313), Luk Fook (590) and Arts Optical (1120) started their careers as trainees. As trainees, they received minimal pays. All they can ask for were daily meals and the teaching of their "masters" in the hope that they would one day start their own businesses using the techniques taught by their masters.

School courses cannot replace on-job training because students in school aim to take course credits, not the mastering of certain tasks. Without such no-pay training system, there won't be any movie star Jackie Chan.

The welfare expenditure that kicked off in mid-1990's has destroyed the opportunities for on-job training and the innovation that would emerge. As Hong Kong has shown in the past, innovation, not government direction, is what an economy needs for it to go forward.

Next time, i will continue to explore the topic of opportunities.

Copyright Quam

讀書樂

常聽說「滿街碩士」，工餘時進修，取得好學歷也找不到一份高薪厚職。為甚麼？是競爭太激烈嗎？茶怪想，兩者未必有關係，首先，進修如果作為投資，是屬於高成本、低回報、高風險、低流通性的。

高成本 -- 時間金錢不在話下。低回報 -- 進修得來的知識技能未必可應用於工作上以提升工作效率。以金融業為例，工作效率主要來自兩方面，投資眼光和人脈關係，兩樣都差不多冇得學，要求的基本知識如數學和語言，都在中學有教，要培養好投資眼光和人脈關係，更重要的是實務經驗。高風險 -- 投資期長，很難預見幾年後，你所修讀的專科的人才需求，很多時間，市場有週期，當某個專業好景，人人爭相進修，誰不知完成課程後，該專業的週期已轉淡，市面上出現大批拿著該專業資格的求職者，工資待遇一定被壓低。低流通性 -- 股票買錯了可即日沽售，換碼，但專業資格不能隨時轉換。

專業資格只限於政府、非牟利機構或絕對排他性的專業，如會計師和律師，發揮利益功效，在市場經濟則不能，工資待遇取決於工作效率，好簡單，考慮聘請你的雇主本身都是打工仔，自己管理的部門也有表現目標。普遍人的認知是: 「一個中五畢業，另一個大學畢業，雇主一定請大學生吧。」對，這是因為有能力的人多入大學大專，這是常規教育選拔機制下所產生的標籤效應。但投身社會之後工餘時間進修，所得的資格已失去標籤效應。

讀書為讀書，搵錢為搵錢，讀書為搵錢是錯配。讀書、進修以提升個人修養，茶怪想，是最快樂和自然的結果，希望搵錢的，最有效的方法是從工作中學習、拼搏，以提升自己的效率。人們不是愚的，為何他們從切身利益考量，都寧願選擇持續進修這項「劣質投資」？可能是因為已沒有更好的投資選擇了，「從工作中學習、拼搏」，回報更低，為甚麼？ 茶怪未有答案。

Anti-Globalization & Us

John Lennon's Imagine is one of my favorite songs. It goes: "Imagine there is no countries," calling for a union for all people in the world. That is really something. At least, that should require all trade barriers that divide markets in different places to be torn down. As he sang: "It isn't hard to do." i would say he was a dreamer, but certainly he was not the only one. The World Trade Organization met in Hong Kong this week to discuss how to open markets. Economist David Ricardo showed that trade will make all countries better off. But if Ricardo was right, and it isn't hard to do, how come we haven't done it?

The Hong Kong meeting is unlikely to reach any conclusion, as disputes over agricultural subsidies remained unsolved. In the street outside the venues are protestors including farmers, human rights activists, anti-Americanists, environmentalists, etc. They raised their concerns over world trade. Hong Kong people find the topics quite obscure. But in fact, globalization is affecting each of us, our jobs, as well as the way we do business and consume.

While we are busy learning English and Mandarin and doing homework for our "Continuing Education", we have to take care of clients and customers overseas. We better do these well, as China is chasing us from behind in the field of services and finance.

Last time, i tried to demonstrate that jobs are moving northward while even more are created here, as long as we keep inventing new things, ideas and services. In an ideal world, we are all happy. But the world is far from perfect, if i lose my job and can't find another one, my unemployment rate is 100%, not the official citywide 5.3%.

"Tom, finish your dinner -- people in China and India are starving." Thomas Friedman, in his book "The World Is Flat -- A Brief History of the Twenty-First Century", recalled what his mother told him, and his advice for his own kids are: "Girls, finish your homework -- people in China and India are starving for your jobs."

Manufacturing jobs have long outsourced to mainland China, while software programming find its way to India. Some fears that, as the trend goes, the big magnets will attract even the urban jobs.

Friedman classified workers who keep their jobs into four categories: "special", "specialized", "anchored" and "really adaptable".

By "special", Friedman really means it. Michael Jordan, Bill Gates, Barbara Streisand are in this category. i would add John Lennon, Bruce Lee, Diego Maradona and Ronnie O'Sullivan, the Rocket. You name it. Their jobs cannot be substituted. They actually benefit from globalization as it introduces them to more people.

Specialized people include lawyers, accountants, brain surgeons, computer architects and software engineers, according to Friedman. But i cannot agree. All of their jobs, but brain surgeons', can all be outsourced, or partly outsourced to low-cost locations once those locations foster enough specialists. Software programming in India is a prime example. China is nurturing accounting talents. The fact that brain surgeons cannot be outsourced is not because of the level of specialization but because of the "anchoring" nature of the job. That brings us to the next category.

Barbers, waitresses, chefs, plumbers, nurses and cleaning ladies are what Friedman means by anchored people. They must be at the same location as their customers to offer the face-to-face or physical-touch services. Friedman said these jobs cannot be outsourced. i think he would have a different view if he lived in Hong Kong. Over the past years, Hong Kong consumers travel to Shenzhen and Macau to enjoy big meals, massage and even dental care. In other words, even though some of these "anchored" jobs cannot travel, consumers can. Cleaning ladies and plumbers must stay. But their wages are declining as immigrants provide plenty of labor supply.

In my view, the only, realistic, category that cannot be outsourced is "decathletes", or what Friedman calls "really adaptable". People who are really adaptable have gained diverse experience and adopted different skills. They are versatile and learn fast, be open minded and ready to say: "Yes, I can." As i tried to demonstrate in the previous article, the world didn't end when jobs are outsourced. It will keep inventing new jobs. The question is whether you are able to take the new challenges. People in countries with advanced education, such as the U.S. and the U.K. have the advantages to this end.

Therefore, the U.S. should be the most supportive country for globalization, despite its growing protectionism. In China, in contrast, low-paid jobs are moving from Shenzhen and Dongguan to more remote areas inward the mainland. Some manufacturers have already moved to Vietnam where labors are even cheaper.

If you can't be Michael Jordan and a "decathlete", you got a problem. Countries that do not have enough Michael Jordan's and decathletes would be worrisome.

Unfortunately, most people in the world, especially in the poorer places, are neither Michael Jordan nor decathletes. Korean farmers cannot turn into Hyundai engineers, probably for their whole lifetime, let alone the unfairness arisen from agricultural subsidies in the rich countries. The governments should take care of their people and let them not starve.

Outsourcing is good to a selfish consumer that i am. How about outsourcing to the future? That sounds convenient. Globalization enables production to boom so fast that the damage to nature is getting out of control. Our next generations would be forced to pay the bill and clean up the mess. Law and regulations are catching up, but far too slowly. In many cases, scientists are unable to evaluate the consequences of the radical changes. The sky is turning gray, sometimes yellowish brown, and the summer is hotter. Outside my office in the Tseung Kwan O Industrial Estates, the mountains of rubbish grows up day by day. A free-trade world is a big dream, but reality check is badly needed to avoid a nightmare.

Nov 14, 2005
Copyright Quamnet

Globalization & Us

When i talked with my friends about the future of Hong Kong economy, they usually have the same worry that Shanghai and other Chinese cities would outshine Hong Kong and replace the city's economic role it has enjoyed as a window of the country. Some of them shared their personal experience of working in the mainland as engineers, financiers and accountants. They said, once they helped establish the systems and teach the mainlanders how to work like Hong Kong people did, the mainlanders can do the jobs on their own. Hong Kong would lose its edges as it cannot compete with the costs in the mainland, and my friends would be laid off. None of them are protesters against globalization. They just accepted that the opening of China was irreversible since it started in the late 1970's.

i agreed with them that China's market economy will go forward as the country has been a big beneficiary of free trade, which is vivid with the rapid economic growth and the rise of its middle class. But wait a minute. Will the opening China steal our jobs and break our rice bowls? Hong Kong's success has based on free trade from the very beginning. China has gotten the ticket for the wild ride. Will free trade turn its back on us?

We are born with free trade and we breathe it. In the early 19th century, Hong Kong became a successful harbor city exporting tea and silk. Hong Kong did the job so well that British has to colonize it and sell us opium to stop losing silver. As a British colony, we developed our legal system, infrastructure and education system, which contributed to greater success. In the 1960's, we developed into a manufacturing city with the influx of labor and capital inflow from the mainland. Manufacture of watches, electronics, garments and toys employed a large proportion of the population.

After the opening of China, factories moved north across the Lo Wu border in the 1980's. Manufacturing jobs followed the pave northward. You know what, we were not finished. Hong Kong had its golden years in the 1990's, with the upsurge of the financial sector. Industrialists raised funds here, poured capital in the mainland to build factories, and brought back the unprecedented profits to spend here. That contributed to the property boom until 1997.

Some people blamed the emigration of factories for the soft labor market that has been prevailing since the property downturn. In fact, the manufacturing jobs have gone for a long time. Many of the unemployed people are in the construction sector, victims of the burst of the property bubble. Some others are new immigrants from the mainland. They haven't adopted the skills demanded in their new home, which is a universal phenomenon happening in other cities populated with immigrants.

Even if the mainland did steal jobs from us, they stole the low-paid ones, which allows us to work out the high-paid ones. Netting out, we have more jobs.

Americans have the same worry that China is stealing jobs from them. In his best-selling book The World Is Flat: A Brief History of the Twenty-First Century, Pulitzer Prize-winning writer Thomas Friedman dismissed this worry. His argument may shed some light on the Hong Kong situation.

The major assumption for Americans losing jobs to China, India and other developing countries is a zero-sum game or "lump of labor theory" -- there are a fixed number of jobs in the world and the question is whether "we" or "they" get them.

Mr. Friedman argues that the lump of labor theory is wrong. If it were right, the U.S. jobless rate would not be at 5% as it is. Even though millions of jobs there have been outsourced to China and India, new jobs are created in the States. "The main reason the lump of labor theory is wrong is that it is based on the assumption that everything that is going to be invented has been invented, and that therefore economic competition is a zero-sum game, a fight over a fixed lump."

"I like going to coffee shops occasionally, but now that Starbucks is here, I need my coffee, and that new need has spawned a whole new industry. I always wanted to be able to search for things, but once Google was created, I must have my search engine. So a whole new industry has been built up around search, and Google is hiring math Ph.D.'s by the bushel -- before Yahoo! or Microsoft hires them. People are always assuming that everything that is going to be invented must have been invented already. But it hasn't."

And globalization will be a catalyst for that process. With globalization, countries that used to have their door shut now open to the world economy, and become part of it. The world economy has become larger and more complex, which generate more demand and some of them cannot even be imagined at present. What's more, Chinese and Indians will turn around to become stylish consumers.

Of course, Hong Kong needs to be as innovative as the States to come up with Starbucks and Googles. But please don't be discouraged. Similar evolutions, albeit in a smaller scale, have just happened here.

Remember the "Big Brother" phones in the 1980's. Holding a mobile phone was really something to show off, which was best depicted by John Woo's classic "A Better Tomorrow". Then, i asked why we needed a mobile phone when we have a pager and can borrow a phone in every local pharmacy stores in the street, free of charge. By the turn of the millennium, mobile phones had already become a necessity. Local pharmacy stores have been losing grounds to Watson's and Manning. Even if you can find one, it no longer does you such a favor.

Now Hong Kong is one of the most connected cities in the world. The telecom sector blossomed and generated a lot of jobs for technicians, salespeople, advertising talents and management.

Free trade plays many roles in these chemical reactions. More obviously, free trade enables the mobility of technologies and manufactured products. What's more. China has entered into the World Trade Organization and is obligated to open its telecom sector to foreign competitors. That pushes mainland telecom operators to improve their management and operation know-how. Recently, they invested in Hong Kong operators. Netcom (906) bought shares in PCCW (8) while China Mobile (941) acquired CR PeoplesPhone (331). i expect these alliances will create value, apart from funds.

Today people worry about the adoption of 3G. You might ask: "Why do I have to subscribe the 3G service, at a premium rate, when most of what I do with the phones are "talking and texting?" Quam cited a survey in Britain saying that 41% of 3G subscribers using their phones for "talking and texting" only. Of the respondents, 14% mistakenly thought that their 3G phones were 2G ones. The survey findings concerned Quam about the ARPU pressure facing Hutchison "3". i think the statistics actually shows that people just use 3G anyway, unnecessarily or even unconsciously.

When the economy advances, people demand better living standards, which "invents" more jobs. The question is how to make the economy advance. Globalization is the key. However, as the worldly trend takes place, things cannot go perfectly smoothly. Some people or countries will enjoy less benefit than the others. Some will even worse off. We have to make sure that we all sit in the same boat. Otherwise, these opponent forces may halt globalization. We will talk about it next time.


Disclosure of interest: i am holding shares in China Mobile.
Nov 30, 2005

A Life of Risk

One of the fundamental problems of an electronic factory is that it has to foresee what their customers need years ahead. A tea restaurant can change its menu in a few days to include Taiwan-style tea milk with chewy candies and blackburry toasts, if it will. However, it takes a few years for a factory to go through the process of adopting the "technology of tomorrow" from developing the technology, building the production lines to product testing, to pilot runs. There involves certain gambling in the anticipation of what people want a few years down the road. In that sense, the business is similar to those of property developers. Both take the risks of wrong judgements. Likewise, people face uncertainties and it is no easier for us to deal with them than a factory or a property developer.

Some career consultants make an analogy between companies and people, saying that an employee can function as an individual company does. Optimistically speaking, i think that can work. You are a company of your own capability to serve your "customer", your employer.

The reality check is, however, you, as an employee, have only one single customer. Your "business" overly rely on this customer for its entire income. People may, if the contracts allow, have freelance job, like what i am having here, which could diversify their income sources. But that could help diversify a little. Few can earn a living as freelancers. Besides, freelancing cut into your leisure time. There is no way for you to outsource your production to any "supplier" if you take the job seriously.

More than once, i have been told by insurance agents: "Join us! Selling insurance is like running your own business!" That's right. Insurance salepeople, or financial planners, have a nice job and some earn a lot of money. But the profession doesn't suit everyone. Most jobs are still single-customer businesses.

Worse, the development time horizon is even longer than those of factories and property developers. In the world of high division of labor, you have to adopt special skills in order to fit into a position. And you have to make decision which career field to go for in your late teens when you go to college. That's when you are young and inexperienced about the world outside school.

When i went to college, the smartest classmates went for Triple E, the abbreviation of electricity and electronics engineering. But nowsdays, some twelve years having past, there aren't too many top jobs in the engineering field in Hong Kong.

The professional jobs are by nature sophisticated enough to absorb all your learning efforts, which unfortunately makes it hard for you to take a detour in career. Therefore, the decision you made at college is a long-shot bet. The risk is you may earn lower income for many years, if not your whole life, than otherwise.

Being a civil servant was a contrarian investment in the early and mid 1990's when most people were dreaming of making overnight fortune in the private sector. Those civil servants chose a less colorful life and accepted relatively stable income for their whole lives. Today, their decisions turn out to be good investments.

Living in the world of unknown future, some people must be luckier than the others. Good judgements could definitely help. Take bird flu. We may take precautious steps to lower the risk of catching it. A housing mortgage is another big risk. Many people are most concerned about it. You have probably visited the place before you decide to buy it or not. But when it comes to career, the risk comes well before you have ever realized it. Economic restructuring can result in numerous victims.

While you are reading this article, it would probably be too late for you to do anything about changing career fields. Hopefully, you don't even think about it. Probably, you are also tied to your mortgage. However, it is always good to prepare ahead.

Back to our analogy between companies and people, studies show that successful companies are adaptive to new market trends and technologies. Jim Collins and Jerry Porras argue, in the classic management book Built to Last, that a successful CEO doesn't need to have outstanding abilities to forecast the market years ahead, but they need to build a company that is flexible and sensitive enough to adapt changes.

i believe this theory can apply to individuals. Have good health, open eyes to the society, be well-connected with people, be versatile, and you may run a successful "business" of your own.

Ride on a time machine and travel back to the past, would you choose a career path different from what you did? If i had a chance to choose again, i would major in sales and marketing in college because it is a practical subject that can apply to different career fields and different job positions. Afterwards, when getting more mature, i could choose whatever i prefer for further studies. You may have different ideas. My ex-collegue Marko told me that philosophy, history and political science are king. Recently, i read more about politics and found it quite inspiring. Perhaps, the knowledge would still be useful some time in the future.

Academics are often seen to live in their own world. They should not, if they want to win a Nobel Prize, argue Nobel Prize Laureate Peter Doherty. "Science is about telling good, readable, memorable stories. It isn't necessary to be a Shakespeare or a Michael Ondaatje, but anyone who wants to be recognised as a top scientist must be able to write clear, concise English," Professor Doherty says in The Beginner's Guide to Winning the Nobel Prize. Chinese novelist Gao Xingjian won a Nobel Prize. His translator did not. It is not about English, i think. My own interpretation of Professor Doherty's sentences is that presentation is the key.

Some people overcome the risk and become even more successful. Great Eagle (41) Deputy Chairman Lo Ka-shui is a cardiologist turned businessman. Virgin Atlantic Airway's boss Sir Richard Branson used to run a music record company. Chief executive Donald Tsang recalled his earlier career as a "lonely salesman" and said he is now no longer lonely. Through the ladder of his political career, has he ever changed job?

Nov 4, 2005
Copyright Quamnet

90 Hours Of Good Time

Reader SM told me to stick to my own job and forget about running a tea restaurant. Rents and competition are suffocating. Operational problems are unimaginable. Despite that, SM said, there were happy moments. One day, a guy offered them $2,000 to stage a marriage proposal. As planned, an engagement ring and flowers took his girlfriend by surprise, and everybody applauded. The guy said they met each other for the first time in the same tea restaurant back in their school days. That was so sweet! Dear SM, you must be proud of being part of other people's dreams.

Work is part of life. If you can't enjoy working, the chance is you can't enjoy life. Some people have a different theory. They find the best paying, yet most boring, jobs, so that their incomes support their wonderful after-hour lives, developing luxurious hobbies such as playing hi-fis.

i doubt that theory actually works.

Most people spend at least 50 hours a week working, 56 hours sleeping, 10 hours commuting. Taking showers and other housekeeping activities occupy another 12 hours at least. Actual leisure time lasts no more than 40 hours a week. The leisure can hardly compensate for the boredom, anxiety, pressure, anger, or simply misery, at work.

Luxembourg Income Study estimates that a typical American worker puts in 1,820 hours a year. According to OECD, his German and French counterparts clock up just 1,480 and 1,467 hours, respectively. Some economists say Europeans enjoy their leisure more than their American counterparts.

If readers follow my "half-full half-empty paradox" in Trust, they know i would invariably argue that Europeans do not enjoy work as much as Americans do. (That might have something to do with higher taxation in Europe.)

Europeans are famous for enjoying life. To be accurate, it is leisure that they enjoy. But if work is an essential part of life, which it is, Americans are not necessarily defeated when it comes to enjoying life.

Most economists identify working as bads and leisure as goods. That's why people get paid by working and pay for leisure.

Back to Hong Kong, i roughly estimate a Hong Kong white-collar salary man works for 2,360 hours a year. That does not include voluntary no-pay overtime. There are many reasons for workers to stay late. One of the reasons is that their bosses and colleagues do the same. Read Happiness. Thankfully, Europeans have strong labor unions, which effectively stop the rat race. We have none. Ironically, we grasp their jobs.

Apart from the rat race, there must be other motivations for staying late, by which i don't mean physically staying in the office. Many people spend their leisure time working, thinking, reading, talking to people, which are all about the work. Former GE CEO Jack Welch's book "Winning" has become another big hit after his "Straight from the Gut". Readers are not paid for reading the books. They spend time and money on them.

A fund manager told me he enjoys making money. A salesperson said he enjoys playing mind games and winning them. A Million-Dollar-Round-Table insurance salesperson said she enjoys giving the protections people need. A news reporter said he wanted to always prepare readers for the worst. All these people do not mind working extra hours.

Are these people workaholics? Let them be as far as they enjoy their work.

Then, for these people, working becomes consuming, goods that they got to pay for. Yes, they look for jobs that excite them. Salaries become a second consideration. Is that sheer hypocrisy? i don't think so.

A six-year-old knows 40 + 50 = 90. A total of 90 hours of good time a week. Take it or not? You decide.

May 25, 2005
Copyright Quamnet