Appendix 6
Manpower Projection for the Catering Industry for 2006-2008
The Labour Market Analysis (LMA) Approach
The LMA approach
1.
LMA examines a group of key statistical data collected by a reliable and
independent authority that reflect important changes in the local economy,
demography and labour market. It then selects some of the data as independent
variables to build a statistical model that can be used to project manpower
requirements in the economic sector under study.
2.
The LMA approach has been successfully applied to the Catering Industry.
The building of a statistical model comprises two main steps. The first step is called
‘Diagnostic’ because two sets of statistical data are tested to select determinants. Set I
comprises the nine core statistics in National Accounts (e.g. Gross Domestic Products
(GDP) and its components) of Hong Kong. These statistics provide information about
our key economic activities. Set II comprises 42 economic indicators with more
disaggregate information about the economy. Such information includes consumption,
investment, trade, tourism, property and related activities, and information about the
labour market, etc. From these two sets, some determinants can be found. To
minimize Types I & II and other errors, these determinants are statistically tested for
correlation
(mutual
dependence
among
determinants),
multi-collinearity
(interdependence among many determinants), and orthogonality (independence
among determinants) before they are grouped into principal components. The second
step of statistical modelling is called ‘Prognostic’ because these principal components
are used to build and maintain the statistical models for manpower projection.
Manpower Projection in the Catering Industry
3.
In the Catering industry, 12 determinants have been found from the 51
economic indicators. The manpower requirements in the Catering industry can thus be
explained by the following principal components by grouping these determinants:
1)
Average size of domestic household [HS]
2)
Composite Consumer Price Index [CCPI],
3)
Implicit price deflator of GDP [PDPG]
4)
Number of catering establishments [EST],
5)
Number of domestic household [NOHH]
6)
Property price index (Private domestic only) [PPI],
7)
Restaurant Receipts in value index [RIVA],
8)
Restaurant Receipts in volume index [RIVOL],
9)
Total loans and advances (HK$ millions) [LA],
10)
Total private consumption in durable goods (volume index) [PCED],
11)
Total private consumption in non-durable goods (volume index) [PCEND],
12)
Unemployment rate [UR]
4.
At the ‘Diagnostic’ step, Principal Component Analysis (PCA) has been used
to select determinants, called Principal Components (PCs), from the two original sets
of economic indicators. The PCs can explain most of the variability (92%) of the
variance (total information) in the past 18 years in the manpower requirements;
therefore, they can safely be used to forecast the manpower requirements in the near
future. For the Catering industry, the PCs comprise LA, RIVA, PCEND and PPI. At
the ‘Prognostic’ step, linear regression technique is then applied to build the statistical
model. The model indicates that there is a strong positive correlation between
manpower and the PC. The R-square worked out to be 0.8472, indicating 85% of the
variation of the manpower requirements can be explained by the PC at the 95%
confidence level.
5.
Several empirical assumptions support the manpower projection model. From
the economic perspective, the decision to employ more people depending on
restaurant receipts in value index (RIVA) and the total private consumption in nondurable goods (PCEND). The property price index (PPI) encourages eating out, and
the total loans and advances (LA) is an indicator of economic confidence.
6.
To use the correlation for projecting future manpower requirements, the values
of the PC for 2006-2008 are initially determined by the time series forecasting method.
The forecast values of the PC are then plugged into the statistical model to project
manpower requirements. A summary of manpower projection using different methods
are presented below.
Year
Actual
Manpower
2005
160,176
2006F
2007F
2008F
Projected
Manpower
(LMA)
Projected
Manpower
(AFM)
Employer’s
Forecast
167,708
162,312
163,800
(4.7%)*
(1.3%)*
(2.3%)*
168,702
164,284
N/A
(0.6%)**
(1.2%)**
169,428
165,985
(0.4%)**
(1%)**
N/A
*
As percentage increase / decrease of the actual manpower against 2005
**
As percentage increase / decrease of the projected manpower against the
previous year
LMA: Labour Market Analysis Approach
AFM: Adaptive Filtering Method
Diagram 1: Actual, Estimated and Projected Manpower for Catering Industry in 1992 - 2008
200,000
194,609
190,000
Total Manpower
180,000
179,602
179,918
168,047
167,708
170,000
167,312
168,702
169,428
160,176
160,000
150,000
152,678
140,000
130,000
1992
1993
1994
1995
1996
1997
1998
1999
Projected
Actual
Estimated (LMA)
Projected (LMA)
Estimated (LMA)
LMA: Labour Market Analysis Approach
AFM: Adaptive Filtering Method
2000
2001
2002
2003
2004
Year
Projected (AFM)
+
Employers' Forecast
2005
2006
2007
2008
2009