Surplus, cost, and economic loss - the critical areas

Provision of Qf - Qh

• A$$onrs = government spending on low-level English language competence for which no high-level premium exists.
• A$$oms = potential utility to employers and consumers, if everyone received high-level competence training
• A$$oms - A$$onrs = A$$mnq - A$$qrs = net social loss, if low-level language competence could be employed as a good substitute for high-level competence.

Provision of Qf - Qe

• A$$kjrs = government spending on low-level English language competence for which no high-level premium exists.
• A$$khs = potential utility to employers and consumers, if everyone received high-level competence training.
• A$$khs - A$$kjrs = A$$hjq - A$$qrs = net social loss, if low-level language competence could be employed as a good substitute for high-level competence.

What happens when industry, government, and the general public are no longer willing to pay even the private sector premium for high-level language competence? The answer is all too obvious, they settle for low-level competence at zero cost, and complain to the government about its failure to provide Hong Kong students with a proper education. Graphically this point is reached to the right of Qh. As high-level competence is no longer profitable nor afordable beyond this point, low-level competence becomes a free substitute for high. Unfortunately, what may be a zero-cost substitute for those who would prefer high-level competence is an increasingly costly quasi-public good for government to supply. If one could imagine a demand curve for low-level competence lying beneath the demand curve for high-level competence, the net social loss from the oversupply of inferior talent becomes obvious. The following points can be made:

• Decreasing marginal return - Although a market does not exist for low-level talent, the utility derived from employing it likely diminishes with increasing numbers. There are two important reasons for this: one, most workers are not required to conduct their work in English; and two, even when presented with the opportunity most do not. In brief, people are too busy attending to other matters that result in more satisfactory performance reviews and higher overall firm productivity. As a result, the synergies that could be obtained from a common medium of communication are rarely achieved. English is valued as a tool to achieve certain tasks. Once those tasks are completed the language is set aside just like an ordinary hand tool. Unused, redundant tools are a poor investment in most shops, and large numbers of unused redundant tools lead to even larger diminishing returns.
  
  
• Rising marginal cost - the cost of producing each additional individual's worth of low-level talent increases with increasing numbers.

Thus, with decreasing marginal return and rising marginal cost the more freely obtained low-level competent individuals employed, the greater becomes the level of social loss. Mathematically, this relationship is described as follows

Although increasing demand and lower cost provision of low-level talent could improve the situation, neither is likely to occur.

Just as a decrease in demand has a pernicious effect on the relationship Aagh - Ahlm, so too does it behave detrimentally with respect to Amnq - Aqrs. Though some (see EARTH's Critique of SCOLAR's English Language Review - Negative Points) may argue that the need for high-level competence will increase over time, current levels are already high in excess.

Moreover, the cost of providing all of Hong Kong citizens with low-level competence is not likely to improve. If anything it will rise, as there is already so much waste, and badly needed talent will seek higher added-value activities elsewhere. As can be seen in the table above an increase in the cost of providing low-level competence has a net negative effect.

Moreover, the situation with regard to the employment of low-level talent and the net social loss obtained from its employment does not change even when firms are required to pay the full-cost of high-level competence.

Freely supplied low-level competence is
a poor substitute for high-level competence - the provision of Q$$f - Q$$e (graph | index)

Although moving from point Qh to Qe does improve the overall stiuation, it does nothing to improve the social loss that results from the employment of excess low-level talent -- Aqrs remains. At point Qe the total loss from the provision of excess high- and low-level competence is measured by the addtion of Ahlm and Aqrs. At Qe only the social waste associated with high-level talent is removed. The social loss from excess low-level competence remains.

It should also be pointed out again that the social gain obtained from the employment of low-level competent individuals to the right of either Qh or Qe is likely less than that obtained from the employment of the same number of high-level competent individuals.Thus, the areas circumscribed by Amos and Ahks exaggerate the social gain from employing low-level comptetent individuals as a freely acquired substitute for those with high-level competence.