Review of the Employees Retraining Scheme
Comments by the Hong Kong Coalition of Service Industries
January 1997

1. We agree with and support the eight recommendations outlined in the review. Before making specific comments on the recommendations, we would like to contribute a more general comment from a broad service industries perspective.
2. The service sector is the biggest provider of employment. For the service industries especially those with an interpersonal element in the delivery of the service, the quality of the workforce is of paramount importance. From that point of view, some very fundamental issues relating to the retraining of labour have not been addressed by the Employees Retraining Scheme.

The mismatch of skills

3. It is well-known that the increase in unemployment in recent years is not due to there being not enough jobs, but because of a mismatch between new jobs and unemployed workers. This mismatch of skills has created a situation where despite the existence of an unemployed workforce, many of the service industries are still experiencing a labour shortage. Many employers in the service sector are reluctant to employ what they consider to be unqualified workers to fill the vacancies. This is highly undesirable, both from a social and a human resources point of view.
4. The aim of retraining is to re-skill the unemployed to prepare them for the new vacancies. In practice, however, the result is far from satisfactory. Many service businesses seem reluctant to employ ex- manufacturing workers or newly-arrived immigrants even though the latter have gone through the retraining programmes. Sometimes this may be due to the difficulty of acquiring service skills, for example, foreign language proficiency which is essential for some services in the hospitality sector. In our view, however, a more fundamental problem lies in the lack of a "service orientation".
5. We would emphasise that this is not to lay the blame on the unemployed worker. We fully understand that for many people a change mid-way through their careers from manufacturing to services would be difficult, especially after going through the trauma of being made unemployed at no fault of their own. But this underlines precisely the importance of creating the right attitude towards service sector jobs. Merely acquiring a new skill does not in itself ensure delivery of a good service.

Re-orientation rather than retraining

6. What is needed, in our view, is a re-orientation of the workers towards service sector careers. Service workers will need a service- oriented set of attitudes and frame of mind to motivate them to provide quality service to clients. From the point of view of re- orientating the workforce, it is more important to educate the workers with the right set of attitudes towards service sector careers than simply to train them in skills.
7. In the early days of Hong Kong's industrialisation, workers took pride in being able to work in factories. Now the displaced workers do not feel proud of being in a service sector job. Without the commitment to a service sector career, the only motivation for them becomes that of money (wages), which is the major bone of contention between employers and workers. In the broader context, this overemphasis on wages is also undermining the harmony by which industrial relations in Hong Kong is traditionally characterised.
8. To enable workers to continue to contribute productively to Hong Kong's economy, therefore, there should be an emphasis in the retraining programme on enhancing understanding of the service industries, creating a positive attitude towards service sector careers, and motivating them to provide quality service.

Market solutions needed

9. However successful the retraining programme is, it remains an administrative solution rather than a solution based on the working of the market. Although this is outside the purview of the current review, we propose that Education and Manpower Branch should seek to develop "market solutions" to the problem of unemployment, that is, to devise measures which would allow market forces to work to a greater extent than the current retraining programmes permit. To give an example of a market solution, government could consider offering assistance in the development of local franchising businesses, thus creating more opportunities for small businesses in the form of franchisees. As a business in itself, a franchisee will be much more motivated than an employee. Franchise systems will also create "better quality" jobs in that the franchisees will be supported by franchisors with tried-and-tested systems of management and business development.

Specific comments

10. Our specific comments on the recommendations are as follows.
    1. Retraining for hardcore of the unemployed: Whilst we agree with the reasoning, we believe the key should be in applying the criteria "flexibly". Some of those above Secondary 3 and below 30 have a need too for retraining and they should not be discriminated against.
    2. New immigrants: We support the extension to new immigrants.
    3. Retraining programme: In accordance with our previous discussion, we believe it is important to build into the programme an element of the "service-based culture and attitude". We realise that this may be an issue of education rather than training, but given the profile of the retrainee (hardcore unemployed plus new immigrants) it is even more important for them to acquire the right attitude towards service sector jobs than merely to be trained in skills. At the risk of being repetitive, the biggest barrier to the "hardcore" from quitting the unemployment queue is often lack of will rather than lack of skills. Specifically, for the "hardcore unemployed", there should be more emphasis on improving their knowledge about the service industries and providing incentive for service sector careers. In the case of new immigrants who are likely to have more incentive to enter the labour market, the emphasis should be on knowledge of Hong Kong, the need to integrate and the importance of the "service culture".
    4. Skills ungrading to be undertaken by VTC: Agreed, but there is no compelling reason why they have to be undertaken only by the VTC. Some competition from the private sector should be encouraged.
    5. Phasing out subsidised on-the-job training: We agree that the subsidy should be phased out, but on-the-job training itself should be encouraged.
    6. Reducing retraining allowance: Agreed; resources should be used more efficiently.
    7. Evaluate training bodies: Agreed. We would further suggest that training bodies should be encouraged to adopt also a "service motif". Retraining is a service in itself, and the training bodies as executive agencies should benefit from adopting a client-based, professional approach, perhaps likened to that of a human resources department. In other words, there should be more emphasis on treating retrainees as individual clients, with consequently more focus on aptitude tests, counselling and placement, rather than treating them as "classes" of unemployed who go through a structured programme.
    8. Placement-tied and performance-based payment for training bodies: Agreed that training bodies should be incentivised.

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