American Government-Economics

Most of the problems of the United states are related to the economy. One of the major issues facing the country today is social security. The United States was one of the last major industrialized nations to establish a social security system. In 1911, Wisconsin passed the first state workers compensation law to be held constitutional. At that time, most Americans believed the government should not have to care for the aged, disabled or needy. But such attitudes changed during the Great Depression in the 1930's. In 1935, Congress passed the Social Security Act. This law became the basis of the U.S. social insurance system. It provided cash benefits to only retired workers in commerce or industry. In 1939, Congress amended the act to benefit and dependent children of retired workers and widows and children of deceased workers . In 1950, the act began to cover many farm and domestic workers, non professional self employed workers, and many state and municipal employees. Coverage became nearly universal in 1956, when lawyers and other professional workers came under the system. Social security is a government program that helps workers and retired workers and their families achieve a degree of economic security. Social security also called social insurance (Robertson p. 33), provides cash payments to help replace income lost as a result of retirement, unemployment, disability, or death. The program also helps pay the cost of medical care for people age 65 or older and for some disabled workers. About one-sixth of the people in the United States receive social security benefits. People become eligible to receive benefits by working in a certain period in a job covered by social security. Employers and workers finance the program through payroll taxes. Participation in the social security system is required for about 95 percent of all U.S. workers. Social security differs from public assistance. Social security pays benefits to individuals, and their families, largely on the basis of work histories. Public assistance, or welfare, aids the needy, regardless of their work records. All industrialized countries as well as many developing nations have a social security system. The social security program in the United states has three main parts. They are (1) old-aged, survivors, disability, and hospital insurance (OASDHI), (2) unemployment insurance; and (3) workers' compensation. THE SOCIAL SECURITY PAYROLL TAX This tax was to be taken from the payrolls of the nation's employers and employees. The government felt that, like unemployment benefits, the social security should be financed by those who got the greatest benefit, those who worked, and were liable to need those benefits in the future. A plan that would affect those only who had paid such a tax for a number of years would have done those who were currently suffering under the Depression no good at all. As a result, the social security plan began paying out benefits almost immediately to those who had been retired, or elderly and out of work, and who were unable, primarily because of the depressed economic conditions, to retire comfortably. In this way, the government was able to accomplish two objectives: first, it helped the economy pull out of the depression, by providing a means by which old people could support themselves and, by buying goods and services, support others in the community ; and second, it showed the younger workers of that time that they no longer had to fear living out their retirement years in fear of poverty. Therefore, the social security payroll tax has been used to provide benefits to those who otherwise would have little means of support, and as of this writing, there has never been a year when Social Security benefits were not paid due to lack of Social Security income. (Boskin p.122) PAYING OUT BENEFITS Social Security benefits increased 142% in the period between 1950-1972. not only the elderly, but many of the survivers, the widows and children, of those who paid into the Social Security system, have received social security checks. These checks have paid for the food shelters, and in many instances the college education of the recipients. Unlike private insurance firms, the United States Government does not have to worry about financial failure. Government bonds are considered the safest investment money can buy-so safe, they are considered "risk free" by many financial scholars. (Stein p. 198) The ability of the United States Government to raise money to meet the requirements of the social security should be no more in doubt than the governments ability to finance the national defense, the housing programs, the State Department, or any of the other activities that the federal government gets involved in. By paying out benefits equally to all participate in Social Security- that is by not relying so heavily on total payments in making the decision to pay out benefits, the system is able to pay benefits to people who otherwise may not be able to afford an insurance program that would provide them with as much protection. One of the main reasons for the government's involvement in this program, is its ability and its desire to provide insurance benefits for the poor and widowed, who under the private market, might not be able to acquire the insurance to continue on a financially steady course. The government, then, is in a totally unique position to pay out benefits that would be out of the reach of many American families. Another great advantage of this system, is the ability of the government to adjust the benefits for the effects of inflation(Robertson p.134) INFLATION AND SOCIAL SECURITY Private insurance plans are totally unable to adjust for the effects of inflation with complete accuracy. In order for an insurance company to make this adjustment, they would have to be able to see forty-five years into the future, with twenty-twenty vision. When a private pension plan currently insures the twenty-year-old worker, it can only guarantee a fixed income when the worker reaches sixty- five and a fixed income is a prime victim of inflation (Robertson p.332) In order to adjust for that inflation, the private insurance firm would have to be able to predict what the inflation rate will be from the moment the worker is insured until the day he dies, and then make the complex adjustments necessary to reflect this in the pension plan. An inflation estimate that is too small will result in the erosion of the workers retirement benefits. Because the government, unlike the private insurance firm, can guarantee that it will exist well into the future, and will have the continued income of the Social Security tax to draw upon, it can make on-the-spot adjustments for changes in the inflation rate. Some adjustments, in fact, have been automatic in the recent years, therefore relieving the pensioners of the periodic worry of whether this years benefits would be adjusted, or whether the level of payments would remain stable, thereby, relative to the cost of living, making them poorer that ever before(Stein p.28). In the face of the government's ability to make those necessary adjustments and to continually finance the Social Security program, many opponents of the system argue that the government programs are driving out the private insurance industry. The statistics remain otherwise. SOCIAL SECURITY FINANCING The social security tax is one of the fewest taxes in the United States, and the only federal tax in the country, that is given for a specific purpose. All other taxes are put into another fund, so that welfare programs, defense, space projects, and the other categories of government spending are all financed from one giant, uncategorized bowl of tax revenues(boskin p.62). When the Social Security system was first established, it was felt that a direct payroll tax, based on the pay of the worker and paid both by employer and employee, would be the fairest way for the people that were currently working to pay benefits to those who weren't working, as well as to provide for some future requirements and disabilities. Therefore, a specially constructed payroll tax was used to fund the program. By measuring the amount taken in by the tax to the amount, not only that is taken out, but to the amount that will be taken out in future years, opponents of the Social Security system make the case that the system will be unable to keep itself in such a manner indefinitely. And, if Social Security were a private insurance program, it wouldn't. But the fact is that Social Security is not a private program. it is funded by the government. Further, the government is in a unique position to change the laws of commerce and contract to adjust the system, making it more responsive to the needs of the retired, which, in turn, would reduce their need for the Social Security benefits. For example, the United states Government should raise the mandatory retirement age. By raising the age to sixty-eight, the Social Security System could delay paying out benefits for several years to thousands of people, saving the system a significant amount of money in benefits. For these reasons, the government is in a position which cannot be compared to private industry. In this sense, looking at social security as an insurance program and comparing it to other insurance programs in the private system could easily give the impression that the system is gong bankrupt, when in the reality it isn't. THE FUTURE OF SOCIAL SECURITY The thing to keep in mind about the Social Security system, then, is this: the system itself is in no fundamental danger of collapse. There is only temporary, cash flow situation that must be carefully looked at. The federal government pays out 4.5 billion more in Social Security benefits as it collects in taxes every year. In fact, $4.5 billion is a small price, compared to the other programs the federal government now finances from general revenue. Besides tapping the general revenue fund and raising the retirement limit to 68 or even 70,the government has the option of raising the Social Security tax or even reducing the benefits slightly. The government has so many options with regard to financing the benefits that the question becomes of the cash management, not quite as significant as the huge deficits that the Social Security has been accused of having. The government is already under way to help alleviate this cash flow problem. Public officials have debated which of the various ways would help best serve the public interest, and legislative action has been taken that would ultimately result of the Social Security system to a positive cash base. This shift would provide the workers of America with the same benefits they have been guaranteed since 1935- and have been paid, and expanded ever since. The social security system has withstood forty years of changing economic conditions and greater concern of public welfare. What would replace the system, if the critics had their way? SOCIAL SECURITY PERSPECTIVES The social security system has saved an untold number of people from disaster throughout many years. Many of the nations old people- some as young as sixty-two, a few over a hundred, live from Social Security paycheck to Social security paycheck, with this government program as their livelihood. There can be no doubt that social security has made a tremendous effort to alleviate a lot of suffering that has occurred, even in recent times. The Social Security act was one of the cornerstones of Roosevelt's new deal program, and it is one of who's necessity has been proven, and whose usefulness has allowed it to live. Like all the other new deal projects, Social Security was never meant to show a financial profit, It was meant to show a profit only in the amount of human suffering, It was able to lift. The social security program cannot be measured in the same manner that a private program can be evaluated in, because it is a governmental welfare program. which doesn't mean that it acts in competition with private programs, that was never its intent. The social security administration has written: "Today the American economic system has produced relatively full employment, widespread ownership property, and a rapidly increasing standard of living for the majority of Americans. It has developed a threefold structure to prevent economic insecurity: a public social objectives, mutual protection through private employee-benefit plans to bring the added strength of voluntary of group action: and private savings and other individual action to achieve the greatest range of choice". One only has to look at the number of people, and the amount of money, that those who are recipients of Social security effect, and the advantages of Social Security become obvious: it has taken a group of people who have traditionally been a financial burden on society, and provided a program that they have contributed a little to their own financial well being. the amount of dignity and self respect these people have gained cannot be measured in dollars.

America Online To Unveil Flat Fee For Internet Access

The Internet is becoming more popular and more widely used, and the Market for internet access is growing rapidly. To stay competitive in this fast-moving industry, America Online has announced that they will switch their price plan for internet access.to a flat-fee rate of $19.95 per month. After the changed in price (decrease), the Supply curve "S" will shift to "S1". An increase in Supply curve will increase (Quantity) people using America Online and decrease Price. America Online has announced a change to their price plan for internet access. before they charged a rate of $19.95 for only 20 hours of internet access. One of the many reasons is that it could help the service against Internet competitors, by doing this "Keith Benjamin says there may be some short-term negative impact on margins." Negative impact on margins means that there will be decrease in earnings. Another reason for this pricing move is part of a broader effort to add new features to the service and make it more compelling than rivals. Since America Online's price is lower people will tend to use America Online more. This is a competitive market as America Online lowers their price, other competitors will lower their price too. This will happen until they reach the Equilibrium. By staying in this fast-moving industry, America Online has unveiled a set of features that include enhancements to listening to audio on-line, better methods for viewing video on-line, and tools for media companies to spruce up their on-line fare. In Addition to that America Online also expected to unveil another initiative whereby Internet-service providers could offer their subscribers easy access to America Online in return for ad revenue.

Capitalism

Today in the United States, a free market system or capitalism is the main economic system. I am interested in this subject because I someday wish to own my own business. I believe that in the future this topic will be very useful to me. Among the topics that I will discuss are the greeks and romans early practices of capitalism, the ideas of Joseph Schumpeter, Rush Limbaugh, and Karl Marx, corporations, regulation by the government, and Reaganomics. I will also discuss the relationship between inflation and unemployment. In addition, I will give my own perspective on the economic theories that I'm presenting. These are just a few of the things that I will be discussing in this paper. HISTORY OF CAPITALISM Many of the institutions of capitalism can be traced back to Greek and Roman times. Things such as trade, moneylending, and insurance were well known practices to them. Unfortunatly, growth of the Roman Empire prevented further development of a private business class. As power over economic growth came back to the people or lords during the Middle Ages, modern capitalism started to evolve. (The Software Toolworks Illistrated Encyclopedia) In the late Middle Ages, the medieval economy was based on MANORALISM. This system said that peasants worked on the land that the lord's owned, but everthing that was produced by them was kept in return they had to perform services or pay dues to there lord. During this time period, there was no incentive to produce large and productive resources. The end of the midieval Manoralism was brought about by a larger demand for goods. Kings competed against lords, and lords competed with peasants for the rights to what was produced. As a result, there was an emergence of merchants and businessmen who accumulated large sums of capital. In addition, there was also a large emergence of banks and the start of corporations. (Galbraith Pg. 58) The only other economic system that got much attention was a new idea called Communism. A person named Karl Marx wrote a book called the Communist Manifesto which thought of the state as being the main controller of economic growth, unlike capitalism where the people in a free market are the main controllers of economic growth. In the 19th century when most of the world like Britan, France, Germany, and the United States were in the age of Laissez-Faire economic capitalism, other countries like the Soviet Union and China followed Karl Marx's Communism. (Galbraith Pg. 97) Modern Capitalism The main thing that drives capitalism today is the large corporations that are able to finance large operations to promote economic growth. As corporations got bigger and bigger, many liberals favored breaking up corporations and putting them under state control. They pressed for antitrust laws to get a competitive economy. This meant that some corporations that got too big had to be broken up to make smaller companies in order to create a competitive economy. The large corporations fought back by saying that they were no less competitive than smaller businesses. An Austrian-American economist named Joseph Schumpeter who argued in defense of large corporations said, "the prime mover in capitalist progress is not the small businessperson but the entrepreneur who introduces new technologies and develops them." He also said "Capitalism gives creative people the freedom to make innovations, unlike state-runned economies which tended to stifle this creative force." He also predicted that capitalism would eventually be replaced by some form of socialism in order to protect the people and the global environment. (The Software Toolworks Illistrated Encyclopedia) Arguments for and Against Capitalism today differs from capitalism of the 19th century because of its dependence on the state. Today government is expected to take measures in order to stop inflation and unemployment. A British economist named John Maynard Keynes said, "government should spend more money in times of slump, and also reduce taxes in order to increase aggregate demand for goods and services, and in boom times the policies should be reversed to hold down inflation." Most liberal economists believed that large corporations ought to be broken up and nationalized so that their manager would be responsible to the public as a whole. (Lekachman Pg. 51) Other conservative econimists stated that evan large corporations were ultimately controlled by the market where they sold their product and the market is subject to the desires of the public. Conservatives also pointed out that government spending by federal, state, and local governments amounted to more than one-fifth of the gross national product. The same thing seemed to be happening in other European countries like Sweeden, and Britain. (Lekachman Pg. 62) During the 1980's when Ronald Reagan was elected president it signaled the return of capitalism as the dominant economic idea in the United States. Reagan's two main policies or objectives were to reduce the size of government and deregulate the economy. The main benefit of Reagan's new policies of lower taxes and tax reform was the virtual elimination of inflation. As a result, the U.S. economy expanded and new records were set on Wall Street. Critics of Reagan favored tax and spend policies that would inflate the economy into what we are now seeing in Russia. As our National Debt got larger, they blamed it on Reagan, but as I see things it was caused by the Democrats in Congress during the 70's who authorized many new spending progams that were not able to be paid for. This is why there was such a problem with inflation during the 70's. I believe it to be unfair to blame him when we saw some of the biggest economic growth in the history of the U.S. during the 1980's. Reagan, as well as many other conservatives, believed that if you cut taxes, it would give incentive to businesses to invest there marginal tax dollars,causing them to earn more money and pay more taxes on their earnings. As a result you get rid of inflation and unemployment at the same time. Critics still protest, saying that these policies are unfair to poor people and minorities. This statement has some truth to it, but in the words of Rush Limbaugh, "Capitalism, though not promising prosperity to all, greatly improves the lot of most and offers opportunity to all." (Limbaugh Pg. 273-274) The concept that I talked about in the last page is called supply-side economics. Liberals think that if you cut taxes, you get less revenue. Right? Wrong! Actual revenues nearly doubled during the 80's from 550 billion to 991 billion. To go even further I would like to see a flat tax implemented. A 15- 18 percent flat tax rate would stimulate the American economy greatly. This would happen by giving huge incentive to everybody to make more money. Of course, some liberal might confuse you by saying that making money is greedy. Sure the rich will get richer, but their businesses will grow due to the fact that they will have more money to employ more people creating less unemployment. Also people currently avoiding taxes either legally or illegally will be brought into an evev system where they will not need to avoid taxes through current legal loop holes. The reason why people like Bill Clinton get elected to be president is because he plays the game of class warfare. Clinton did a good job of convincing the poor and the middle class that Reagan did them wrong. Clinton believes that the rich should be punished by higher taxes. I ask you, "why should you punish prosperity?" The main goal of the liberals and Bill Clinton is the reditribution of wealth. The key question to ponder is, " when do profits become unfair and excessive?" (Limbaugh Pg. 118-119) In conclusion, capitalism is the best thing to help the United States economy grow. The entrepreneur is the person who makes this economy rum smoothly and profitably. A creative person at the head of a company can do alot more than a person who is at the head of a state-runned bureaucracy. This is true because the entrepreneur has incentive to do the job correctly, but the bureacrat has none because he knows that his job will still be there tomorrow no matter how he performs. I will agree that pure capitalism won't work because you still need environmental laws and other laws to protect the consumer. However, problems begin when extreme socialistic views like Bill Clinton's are imposed.

The Unemployment Rate

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 of Hong Kong. However, there are some changes in the investment environment in China recently. Firstly, it is the high inflation rate. For the past two years, the inflation rate was about 20%. Under the macro policy, the recent figure is 18.5% which is still quite high. Secondly, the government begins to raise the property tax. With these two factors, the profitability of investing in China decreases. Therefore, the purchasing power of Hong Kong's service sector is directly affected and so many labour are being dismissed. 4. High rent and high inflation rate 8 years continuous high rent and high inflation rate make the production cost of the Hong Kong enterprises, especially the labour cost , increase tremendously. On one hand, this encourages the enterprises move their labour-intensive industries to other place where the labour cost is cheaper. On the other hand, these enterprises try to dismiss labour or reduce the engagement of work force but change to more capital and technology dedication in order to reduce the production cost, increase standardization and productivity. Also, many enterprises could not stand the high rent and closed down, such as the Japanese department store, Mitsubishi. A lot of labour are then released out and become unemployed. 5. Non-intervention government policy The Hong Kong government lacks long term planning in the economy. They just try to adopt a non-intervention policy to the economic problems. In fact, in 1980s, the economic structure was changing. The manufacturing industries were declining. However, the government did nothing to help. Also, the government, for a long time, ignores the research and development of the high technology application. Thus Hong Kong's industrial technology cannot not catch up with the other three dragons. This explains why the productivity of the Hong Kong people is reducing recently. In 1990-1994, the productivity of Hong Kong labour is 3.8% but Taiwan and South Korea is 4.8% and Singapore is 4.5%. From this , we can see that the competitive power of the Hong Kong industries is weakening and high unemployment rate is inevitable. Government carries out high land policy which leads to a tremendous rise in the property price, so the rent of the shops and factories increases. The widespread implementation of the sewage treatment charges also increase the production cost. This is also a reason why the factories move to the north or close down. 6. Labour importation scheme Is it the main reason responsible for the rising unemployment rate in Hong Kong? a) The viewpoint of the government Government economist Tang Kwong-yiu said that the labour importation scheme is not the main responsible for the rising unemployment rate in Hong Kong. He attributed it to the faster growth in total labour supply relative to that of total employment. Students looking for summer jobs have aggravated the unemployment problem during the last three months. Also, the influx of illegal immigrants from China, the return of overseas Chinese and the hiring of expatriates also aggravated the job shortage. However, Mr. Patten proposed replacing the Labour Importation Scheme with a Supplementary Labour Scheme that would aim to cut the number of imported workers from 25,000 to 5,000 from January. b) The viewpoint of Democratic Party Though the labour importation scheme is not the main reason, it's implementation aggravates the unemployment problem. They believe that the change in the economic structure is the main reason. The problem became obvious in the mid 80s as many factories moved to the north. However, the government did not intervene. They still want a termination of the scheme so that the problem can at least be lessen at the mean time. c) The viewpoint of the labour union They believe that the this scheme should be stopped at once. They were disappointed by the Governor's failure to scrap the imported labour scheme for the new airport project. Construction workers would continue to see their jobs being taken by foreign laborers. Unionist Lee-Cheuk- yan said that in Hong Kong, we don't need any imported labour, not even 5,000. d) The viewpoint of the economists i) Mr. Lui from the Economic Development Research Center of HKUST A research has been done and the result is that the change in the economic structure contribute 60% for the rising unemployment rate. The labour importation scheme is just a minor factors and the influence to the labour market is not significant. The scheme is not just carried out in Hong Kong but also in USA and Germany. But we cannot see that imported labour has significant influence on the unemployment rate. This is because imported labour though take away the job of the local labour, at the same time they create job opportunities for them. If the company employees imported labour, the production cost can be reduced. This will keep the enterprises from moving to other places or even will attract more investors to Hong Kong. This will benefit the local labour. ii) Mr. Wong from the Management Department of Lingnam College He does not agree with the research of Mr. Lui. He believe that though the importation scheme is not the main reason , it is the root of the sin. The influence that bring to the economy is not insignificant. What's wrong with this scheme is that the government officials ignore the opinion of the public and make this scheme as a long term policy. Also, the imported labour are widely employed in all kinds of job, so the government has not considered the employment problem of the labour released out from the declining manufacturing industries. Despite the effect of the labour importation scheme, this economic argument has changed to a political issue for difficult political party to gain votes in the election and support. They all try to bargain with the government officials and propose bills to debate in the Legislative Council for a termination of the scheme. Donna In previous parts, we have explore the reasons of high unemployment rate recently, how we will begin the part that describe the situation of Hong Kong's unemployment. It includes description about the current unemployment situation and the changes on unemployment rate in the past 10 years, as well as the underemployment rate. Also, we will analyze the change in our labor force. In the second part, the unemployment rate in specific sectors will be analyzed so that it can help to study the structural change in the unemployment rate. Also, the reason of the structural change will be analyzed. A. Unemplopment, Underemployment and duration of unemployment 1. Unemployment in HK The recent unemployment figure in the 2nd quarter of 1995 is 3.2%. It is the highest figure in the past nine years. Many people as well as the government are announced of this significant increase in unemployment rate. It is concluded that unemployment in HK changed from short-term to long-term. The unemployment in 1989 is 1.2%, it gradually jumped to 3.2% in 1995, there is continuous increase year to year, but no decrease in this 7-year period. Before, problem of higher unemployment rate only extended from 2 to 3 years. This description of figures show how unemployment change from short to long term. Also, a graph is presented to show the changes of the unemployment rate in the past 10 years. 2. Underemployment in HK When a person who work for pay less than 35 hours in a month, he is said to be under-employed. In the 2nd quarter of 1995, the underemployment rate reached 2.1%. There are about 589,000 people who are under-employed. There, we will also present the figures in the past 10 years in a graphical form which can help to detect the degree of changes. 3. Duration of unemployment In 1994, there are 21,000 persons unemployed for more than 3 months , it contributed 26.2% of the total number of unemployed workers. The figure jumped to 31,000 in 1995, the contribution also increased to 31%. The data help to conclude that the duration of person who are unemployed extended very much. Before, they are temporarily unemployed, but they can soon find a new job within a short period. But now, they have to face a permanent problem of losing job. A set of data further illustrates the worse situation. The number of persons unemployed for more than 6 months in 5 recent quarter are presented in a table. B. Structural change in unemployment According to the statistical data, the nature of unemployment rate changed very much. Before, labour in manufacturing sector suffered most from economic slowdown and change in economic structure. However, the retail and service sector also face this problem. The unemployment problem extended from manufacturing sector to nearly all industry in HK. In this part, we are going to analyze the structural changes and explore the reasons leading to these changes, particularly in the manufacturing, retailing, service and construction industries. 1. Manufacturing sector In 1987, the manufacturing sector employed about 800,000 workers, but it gradually drop to 395,000. In the sector, there is an average decrease of 50,000 to 60,000 persons employed. The unemployment rate particular in the manufacturing industry from 43.9% in 1989 to 53.6% in 1994. There are several reasons explaining the increase. Firstly, owing to economic slowdown and structural change, the manufacturing industry is badly affected, many firms were closed. To save cost, the factories move their production line to mainland China to take advantage of cheap labour. It left many local workers unemployed. In addition, the workers in the manufacturing industry are of low skills, and they are incapable to find other job requiring special skills. Another reason is which is controversial is the importation of labour. Because their wages are lower, local workers are replaced by them because the manufacturers want to save cost. As a result, unemployment become more serious in this sector. 2. Retailing sector Before, local retailing industry prosper from 1980s due to economic growth and full confidence of investors to make investment in HK or in China. But in recent years, retail industry also suffer a slowdown. According to statistical data, in the past 3 years, the retail industry has an average 1.9% growth in sales volume. However, in April 1995, the figure decreased for 2% compared with the same period in last year. Also, unemployment rate in this sector increased. In first quarter in 1995, the total unemployment in retail industry contribute 30% of the economy's total, which it the second highest share, while the largest share is the manufacturing industry. 3. Service industry Service industry continuously grow in the 1980s and early 1990s. Many people are employed in this sector. However, it also suffered from the economic decline in recent years. Service sector includes the hotel service, transportation service, food and beverage, financial and asset management, etc. In the service sector, there are about 15,000 people unemployed in 1995, which represents an 21% increase compared with last year. It is higher then the total unemployment figure in the manufacturing industry. The reasons are basically the same in explaining high unemployment rate in both the retailing and service industry. Again, economic slowdown lead to reduced investment and consumption of goods and services. Also, economic decline in China also reduced investment projects in the Mainland, thus demanding less service. With high inflation rate, people are more sensitive on the way they spend money. Now, they spend less on buying goods and consuming service which are unnecessary. Therefore, large service corporation such as HK Telecom begin to cut the labour force to fit with the demand. More importantly, service industry also start to operate in Mainland China. The decline in the service industry cannot absorb the large labour force, especially workers who leave from the manufacturing industry. 4. Construction industry The unemployment rate in this sector is lower when compared with the manufacturing, service and the retailing industries. In 1995, the unemployment rate in construction decrease, but the underemployment rate increased. There are some large project that lead to greater labour supply in the construction sites. For example, the New Airport project demands many skilled construction labour. On the other hand, the demand of lower-skilled construction workers decreased because of the decline in the estate market. The large construction project are often technology oriented, and the machines and equipment is more difficult to manipulate. So, unemployed construction workers from the estate market cannot transfer to the large project because they are not qualified to operate the high-tech machines. Therefore, some vacancies are unfilled by the low-skill workers. Unemployment in this sector remains unsolved. C. Vacancies by different sectors in HK economy The following chart is given to illustrate the portion of vacancies by different sectors in 1995. It is arguable that the unemployment in HK is not so serious, because there are still many vacancies . However, the problem is that the unemployed workers cannot find the job that fit to them or they refuse to accept a lower wage. On the other hand, employers may not employ workers of lower skills. So, there is a situation that the demand and supply of labour skill is not matched. D. Relationship Between Unemployment Rate and Inflation Rate A general belief tells that there is a negative relationship between unemployment rate and inflation rate. Some economists claim that the contemporary economic situation in Hong Kong, high unemployment rate associated with a relatively low inflation rate, is a predictable result from periodical adjustment of built-in economic mechanism. Since 1987, the persisted high inflation rate had pushed the costs of production and operation up to a very high level. Therefore, people suffered from a reduction of purchasing power and negative wealth effect. Meanwhile, people tend to save more because of their fear on the instability arising from the transition of sovereignty in 1997. On the other hand, policy-makers tried to release the high inflation rate by means of imposing a higher interest rate. By the way, the general price level begins to fall after a continuous increase for eight years.

The Used Car Industry

In the past 30 years, the United States auto industry has gone through many changes. In order to stay competitive with a foreign market, constantly threatening to eat away at profits, the American auto industry has had to respond by being flexible and adapt itself to this new situation. Although, in the past, they were slow to get the message sent out by the consumers, the domestic auto industry now seems to be more than willing to analyze, and answer, the demands of a smarter, savior consumer. The growth of the used car field has been a result of these demands. Rising, higher prices for new cars have caused the typical American consumer to examine alternate solutions for their transpiration needs. As the average car on the road is 8 years old, compared to 5.8 years in 1970, the signal to the auto industry has been that cars are being built better and consumers are not afraid to buy them. Of course, this choice does not come without an opportunity cost for the consumer. A used car will generally be bought on the condition "as is" or, at best, with a very limited warranty. If a buyer of a used car drives off the lot and finds they have purchased a vehicle that needs lots of money spent on it for repairs, they may possibly find themselves out of luck. Another downside may come as more people continue to saturate the market, looking for used cars to buy, the resources available will become scarce. An increase in used car prices may gradually start to rise. As the figures indicate, for now consumers seem to be content with taking this risk. Sales for used cars and trucks last year totaled at 15.1 million(going on your article's figures). The auto industry has been busy changing and evolving to answer consumer demands. One of these signs has been the growth of large auction houses that are appearing all over the country. Big investors are attracted by the potential profits, which are an average of 1.5% of the wholesale price. The auctioneers make their money by auctioning off used cars and trucks mainly to dealers only, and are supplied with vehicles that come from trade-ins, repossessions, leased vehicles, and smaller used car lots. With this reallocation of resources many of the smaller mom and pop used car lots have been bought out, or forced out of business. Competition is heating up with the rise in the number of auction houses. This has forced the auctions to be more selective in the kinds of vehicles they offer. More care is being spent to check title searches, odometer readings, and accident history of the vehicles that is an advantage for both the dealers and consumers. More money is being spent in advertising and offering perks to lure in prospective dealers. As some auto manufacturers are entering into the auction business independents are beginning to have cause to worry that their profits will begin to fall. The auto dealers are not sitting by being idle either. They are responding to consumer demands by building and expanding existing used car lots to sit side by side next to their new car showcases. The dealers are more than happy to do this as they can make more of a profit selling a late-model used car than on a new car. Without having to offer much of a warranty will also only add to this profit. Dealers still have an opportunity cost of their own to contend with. Just like a consumer, they have the risk when buying the cars from and auction, and take the chance of being stuck with a lemon. Also, for every dollar spent on their used cars, they have less money to spend on the new car section. The cycle of change in the auto industry is an ever evolving one. New car manufacturers will need to take a long, hard look at the industry and may be forced to make some changes to attract business back their way. They may be forced to lower prices, cut back production on new vehicles, or lay off workers if people continue to look for cheaper vehicles to purchase. Economists will be sure to keep an eye on the industry to see in which way the market will be moving next. In the past 30 years, the United States auto industry has gone through many changes. In order to stay competitive with a foreign market, constantly threatening to eat away at profits, the American auto industry has had to respond by being flexible and adapt itself to this new situation. Although, in the past, they were slow to get the message sent out by the consumers, the domestic auto industry now seems to be more than willing to analyze, and answer, the demands of a smarter, savior consumer. The growth of the used car field has been a result of these demands. Rising, higher prices for new cars have caused the typical American consumer to examine alternate solutions for their transpiration needs. As the average car on the road is 8 years old, compared to 5.8 years in 1970, the signal to the auto industry has been that cars are being built better and consumers are not afraid to buy them. Of course, this choice does not come without an opportunity cost for the consumer. A used car will generally be bought on the condition "as is" or, at best, with a very limited warranty. If a buyer of a used car drives off the lot and finds they have purchased a vehicle that needs lots of money spent on it for repairs, they may possibly find themselves out of luck. Another downside may come as more people continue to saturate the market, looking for used cars to buy, the resources available will become scarce. An increase in used car prices may gradually start to rise. As the figures indicate, for now consumers seem to be content with taking this risk. Sales for used cars and trucks last year totaled at 15.1 million(going on your article's figures). The auto industry has been busy changing and evolving to answer consumer demands. One of these signs has been the growth of large auction houses that are appearing all over the country. Big investors are attracted by the potential profits, which are an average of 1.5% of the wholesale price. The auctioneers make their money by auctioning off used cars and trucks mainly to dealers only, and are supplied with vehicles that come from trade-ins, repossessions, leased vehicles, and smaller used car lots. With this reallocation of resources many of the smaller mom and pop used car lots have been bought out, or forced out of business. Competition is heating up with the rise in the number of auction houses. This has forced the auctions to be more selective in the kinds of vehicles they offer. More care is being spent to check title searches, odometer readings, and accident history of the vehicles that is an advantage for both the dealers and consumers. More money is being spent in advertising and offering perks to lure in prospective dealers. As some auto manufacturers are entering into the auction business independents are beginning to have cause to worry that their profits will begin to fall. The auto dealers are not sitting by being idle either. They are responding to consumer demands by building and expanding existing used car lots to sit side by side next to their new car showcases. The dealers are more than happy to do this as they can make more of a profit selling a late-model used car than on a new car. Without having to offer much of a warranty will also only add to this profit. Dealers still have an opportunity cost of their own to contend with. Just like a consumer, they have the risk when buying the cars from and auction, and take the chance of being stuck with a lemon. Also, for every dollar spent on their used cars, they have less money to spend on the new car section. The cycle of change in the auto industry is an ever evolving one. New car manufacturers will need to take a long, hard look at the industry and may be forced to make some changes to attract business back their way. They may be forced to lower prices, cut back production on new vehicles, or lay off workers if people continue to look for cheaper vehicles to purchase. Economists will be sure to keep an eye on the industry to see in which way the market will be moving next. In the past 30 years, the United States auto industry has gone through many changes. In order to stay competitive with a foreign market, constantly threatening to eat away at profits, the American auto industry has had to respond by being flexible and adapt itself to this new situation. Although, in the past, they were slow to get the message sent out by the consumers, the domestic auto industry now seems to be more than willing to analyze, and answer, the demands of a smarter, savior consumer. The growth of the used car field has been a result of these demands. Rising, higher prices for new cars have caused the typical American consumer to examine alternate solutions for their transpiration needs. As the average car on the road is 8 years old, compared to 5.8 years in 1970, the signal to the auto industry has been that cars are being built better and consumers are not afraid to buy them. Of course, this choice does not come without an opportunity cost for the consumer. A used car will generally be bought on the condition "as is" or, at best, with a very limited warranty. If a buyer of a used car drives off the lot and finds they have purchased a vehicle that needs lots of money spent on it for repairs, they may possibly find themselves out of luck. Another downside may come as more people continue to saturate the market, looking for used cars to buy, the resources available will become scarce. An increase in used car prices may gradually start to rise. As the figures indicate, for now consumers seem to be content with taking this risk. Sales for used cars and trucks last year totaled at 15.1 million(going on your article's figures). The auto industry has been busy changing and evolving to answer consumer demands. One of these signs has been the growth of large auction houses that are appearing all over the country. Big investors are attracted by the potential profits, which are an average of 1.5% of the wholesale price. The auctioneers make their money by auctioning off used cars and trucks mainly to dealers only, and are supplied with vehicles that come from trade-ins, repossessions, leased vehicles, and smaller used car lots. With this reallocation of resources many of the smaller mom and pop used car lots have been bought out, or forced out of business. Competition is heating up with the rise in the number of auction houses. This has forced the auctions to be more selective in the kinds of vehicles they offer. More care is being spent to check title searches, odometer readings, and accident history of the vehicles that is an advantage for both the dealers and consumers. More money is being spent in advertising and offering perks to lure in prospective dealers. As some auto manufacturers are entering into the auction business independents are beginning to have cause to worry that their profits will begin to fall. The auto dealers are not sitting by being idle either. They are responding to consumer demands by building and expanding existing used car lots to sit side by side next to their new car showcases. The dealers are more than happy to do this as they can make more of a profit selling a late-model used car than on a new car. Without having to offer much of a warranty will also only add to this profit. Dealers still have an opportunity cost of their own to contend with. Just like a consumer, they have the risk when buying the cars from and auction, and take the chance of being stuck with a lemon. Also, for every dollar spent on their used cars, they have less money to spend on the new car section. The cycle of change in the auto industry is an ever evolving one. New car manufacturers will need to take a long, hard look at the industry and may be forced to make some changes to attract business back their way. They may be forced to lower prices, cut back production on new vehicles, or lay off workers if people continue to look for cheaper vehicles to purchase. Economists will be sure to keep an eye on the industry to see in which way the market will be moving next.