1 hk’s economy, labour market and income disparity k c kwok government economist 2 march 2007

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1 HK’s economy, labour market HK’s economy, labour market and income disparity and income disparity K C Kwok K C Kwok Government Economist Government Economist 2 March 2007 2 March 2007

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1

HK’s economy, labour market HK’s economy, labour market

and income disparityand income disparity

K C KwokK C Kwok

Government EconomistGovernment Economist

2 March 20072 March 2007

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Some unanswered questions

• Is HK too expensive and uncompetitive? Is HK marginalized? Has HK’s economy structurally transformed itself?

• How serious is our structural unemployment, skill mismatch problem and what’s the future for our lower-end workers?

• How serious is our income disparity problem? What are the reasons? Will a minimum wage policy address the issue?

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Broad-based improvements in labour market

Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q311-11993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

0

1

2

3

4

5

6

7

8

9

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11Unemployment rate (%)

Overall

Lower-skilled workers

Professional and managerial staff

2006

4.84.4

1.9

03Q2 : 8.5

03Q2 : 10.0

03Q2 : 3.8

06 Nov- 07 Jan

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Financial, and trading and logistics services lead economic growth in recent years

2001-2003 2004 2005 2006 Q1-Q3

(%) (%) (%) (%)

Services 3.0 10.1 8.0 8.3

Wholesale and retail -1.0 7.8 7.4 4.8

Import and export trades 7.5 15.4 16.1 10.6

Restaurants and hotels -11.0 22.6 6.0 9.4

Transport and storage 1.2 14.0 6.8 8.0

Communications 8.9 13.8 11.5 11.1

Financing and insurance 4.6 21.7 11.9 19.9

Real estate and business services

0.8 1.1 3.2 1.6

Community, social and personal services

1.3 2.9 0.4 1.8

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Beveridge curve for the entire economy, 1986 - 2006 Q3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0Unemployment rate

Vaca

ncy

rate

1986-1996

1997-2002

2003-2006 Q3

86

88

90

97

9801 03

0506 Q3

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Economically EconomicallyElderly inactive active

households households households Total

1996 Q4 60 400 19 000 12 200 91 600(3.2) (1.0) (0.6) (4.9)

2003 Q4 120 800 31 200 42 900 194 900(5.6) (1.5) (2.0) (9.1)

2004 Q4 116 700 32 100 36 900 185 600(5.4) (1.5) (1.7) (8.5)

2005 Q4 114 100 33 700 27 200 174 900(5.2) (1.5) (1.2) (8.0)

2006 Q4 111 600 32 900 28 000 172 600(5.0) (1.5) (1.3) (7.7)

Notes : (#) Defined as households with monthly household income of less than $4,000.( ) Share in all domestic households.Excluding foreign domestic helpers.

Number and share of low-income households#

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Some unanswered questions

• Is HK too expensive and uncompetitive? Is HK marginalized? Does HK have a future?

• How serious is our structural unemployment? Will our lower-end workers be able to find work?

• How serious is HK’s income disparity problem? What are the reasons? Will a minimum wage policy address the issue?

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Thank You