One often hears that Hong Kong employers find it difficult to hire fresh graduates with good competence in the English language. If my analysis is correct Hong Kong government and industry are already obtaining many more than they deserve.

The Hong Kong economy is suffering a major net social loss brought about by well-intentioned, but poorly conducted government intervention.

The analysis is based on a joint supply curve which divides the supply of high-level English language competence into two parts: low-level competence supplied by the regional government as a quasi-free, quasi-public, economic good and a private sector premium for high-level competence.

In the absence of a market for low-level competence, the market for high-level competence is clearly distorted. In order to understand the policy ramifications associated with this distortion, net benefits to each of the key players are fully illustrated and examined. The key players include government and industry employers, private sector suppliers of high-level competence, the Hong Kong Department of Education, and last but not least Hong Kong taxpayers.

Although this model is only a theoretical abstraction, it is based on many years of carefully observed social phenomena, and provides an excellent theoretical basis for future empirical analysis.

Finally, unlike many mathematically sophisticated models that require substantial review before they are understood, this model is achieved entirely with pictures and easily understood by anyone with a basic, but solid understanding of market supply and demand. more...