Sharon Lam (16), Jessica Lim (23) 4C
Economics assignment
News Report
Newspaper
Apple Daily (23rd April, 2004)
Description
The government released the latest unemployment rate of Hong Kong for
the period from January to March of 2004 which was 7.2%. It remained
unchanged as compared to the previous period.
The Financial Secretary, Mr. Henry Tang, believes that despite of the
improvement in Hong Kong’s economy, the employers are still in doubt of
the prosperity of their business, and therefore, they are reluctant to hire
more people. So, Hong Kong still suffers from high unemployment rate
although more people are willing to find a job. Hence, 430 more workers
are being unemployed.
On the other hand, the Hong Kong Federation of Youth Groups Youth
Employment Network and the government had established the “Youth
Self-employ Assistance Scheme” in order to help fresh-graduated students
to find jobs and to retain their competitiveness by gaining more working
experience.
The manager of the Hong Kong Federation of Youth Groups Youth
Employment Network believed that self-employment is quite suitable for
young people because they are creative, willing to try new things and
they have the sense of trend.
Explanation
Unemployment implies that there is
an excess supply of workers. We
1
can demonstrate it by drawing a supply-demand graph.
Originally, when the market price (W1) is higher than the equilibrium price
(Pe), quantity supplied of workers is greater than quantity demanded of
workers. So, an excess supply of workers resulted. Unemployment
occurred.
As the economy in Hong Kong is improving, so, more people were
more willing to find jobs. Hence, this caused an increase in the excess
supply of workers and thus, more people are unemployed.
Workers in Hong Kong
As there is an
improvement in economy
of Hong Kong, more
people were more willing
to find jobs. This caused
an increase in supply of
workers (Qs1Qs2). So,
there is an increase in the
excess supply of workers
(New Excess Supply).
Hence, this led to 430
more workers to be
unemployed.
A person who participates in the Self-employ Scheme is both the
labour and entrepreneur of his business.
In the study of Economics, labour is the human resource used in the
production process, including both skilled and unskilled, physical and
mental workers.
An entrepreneur is a person who owns a firm. He takes up different
functions from that of labour. The entrepreneur bears the risk and
uncertainty of production. Hence, the position of the entrepreneur is
more risky than labour because the return to the entrepreneur is
determined after production and thus, it is uncertain, whiles the return
to the workers is determined before production and so it is certain.
2
An entrepreneur makes decisions on what goods to be produce, how
to produce them and how to sell them. He organizes the three factors
of production so as to minimize his production cost. On the other hand,
labour do not take part in the decision-making process, they only work
according to the instructions and orders given by the entrepreneur.
So, we can conclude that if a dancer participates in the Self-employ
Scheme, she is both the entrepreneur and labour of her business. It is
because the dancer will make production decisions on what kind of
dance she will dance in her show and she will bear risk if she dances
badly as she maybe unemployed. She will then participate in the
production process, which is the process to provide service and
satisfaction to people during her show.
Self-employment is a kind of sole proprietorship.
The person who participates in the Self-employ Scheme is both the
entrepreneur and the labour of the business. So, we can say that Selfemploy is a kind of sole proprietorship as there is only one owner in the
business.
In the study of Economics, the characteristics of sole proprietor are to
provide all the capital and make all the final decision about the firm.
He can get all the profits but at the same time bear all the loss and risk.
His has unlimited liability, he is responsible for all the liabilities of the firm.
If the loss is greater than the capital he put in the business, he has to
use his personal properties to repay the debt. There is no separate
legal status, if the firm breaks the law, he will be legally responsible for
the firm’s act. So, we can conclude that self-employ is a kind of sole
proprietorship.
There are some advantages for the sole proprietor. He can get all profit
and has the greatest incentive to reduce costs, risks and avoid loss. A
sole proprietor can make decisions quickly because he does not need
the approval of others. He can maintain a close relationship with the
employees and consumers because the firm is usually small in size. It
raises morale and productivity of employees. He can also know more
about the preference of consumers as he is in direct contact with them.
In Hong Kong, the sole proprietor simply registers with the Inland
Revenue Department for a business licence. He can then start business.
The profits tax rate of sole proprietor is lower than limited companies.
There is no need for him to disclose the firm’s financial accounts to the
public. So, sole proprietorship is a good way for unemployed workers
to start their business.
3
Suggestions
Partnership is also a good way for the unemployed people to start their
business.
Comparing sole proprietorship with partnership, there are some
disadvantages of sole proprietorship. For example, there maybe a
limited source of capital for the sole proprietor to run his business. The
source of capital is limited to the wealth of the sole proprietor. So, it is
difficult for him to have expansion of his business and thus, he couldn’t
enjoy the benefits of a large-scale production.
As there are some disadvantages for sole proprietorship, if there is a
group of young people, we suggest them to set up a business together
and start a partnership. A partnership should contain 2 to 20 partners.
There are some advantages for partnership. Partnership has wider
source of capital than sole proprietorship because there are more
owners to contribute capital. It is easier to have expansion. Also, the
cost and risk of partnership will be smaller than sole proprietorship.
Since there is only one owner who makes decision in sole proprietorship
but for partnership, they can share the cost and risk among partners, so
the risk is reduced.
However, comparing partnership with sole proprietorship, there are
also some disadvantages of partnership. There will be delay in
decision-making as partners need to consult each other. They may
disagree with each other. It may take a longer time than sole
proprietorship to make a decision.
So, the unemployed people can start their business by sole
proprietorship or partnership according to their preference.
Conclusion
From this news, we can conclude that unemployment is caused by the
excess supply of workers. There will be an increase in the excess supply of
workers and thus, 430 workers more are unemployed due to the
improvement in Hong Kong’s economy. Besides, a person who
participates in the “Youth Self-employ Assistance Scheme” is both the
labour and entrepreneur of his business. In addition, the fresh-graduated
students can start their business by sole proprietorship or partnership
according to their reference.
The End
4
5