With youth unemployment at record levels in the world’s second-largest economy, China’s young people face weaker economic gains.
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As youth unemployment in China soars to a record high, college graduates are in for a storm — some being forced to take low-paying jobs or settle for jobs below their skill level.
Official data shows that urban employment among 16-24 year olds in China hit a record 20.4% in April – about four times the overall unemployment rate, although millions more college students are expected to graduate this year.
“This college bubble is finally bursting,” said Yao Lu, a professor of sociology at Columbia University in New York. “The expansion of higher education in the late 1990s led to this huge influx of graduates, but there is a mismatch between demand and supply of highly skilled workers. The economy has not caught up.”
The scourge of underemployment is another issue facing Chinese youth and policymakers.
In an article Lu co-authored with Xiaogang Li, a professor at Xi’an Jiaotong University, the professors estimate that on top of the rising youth unemployment rate, at least another quarter of China’s college graduates are underemployed.
“In order to avoid unemployment, college graduates are increasingly taking positions that do not match their education and qualifications,” Lu told CNBC.
Underemployment occurs when people settle for low-skilled or low-paid jobs, sometimes part-time, because they cannot find a full-time job that matches their skills.
“These are the jobs that used to be mostly filled by non-college graduates,” Lu added.
The devastating effects of graduating from high school in tough economic times are well documented in other societies. Stanford University research shows that college graduates who begin their professional lives during a recession or economic downturn earn less than those who graduate during prosperous periods for at least 10 to 15 years.
Scaring misfortune?
Data from China Bureau of Statistics shows that 6 million of the 96 million 16-24 year olds in the urban workforce are currently unemployed. Based on this number, Goldman Sachs estimates that there are now 3 million more unemployed urban youth compared to the period prior to the Covid-19 pandemic.
This should make the Chinese government’s need for action even more urgent.
“Diminished job prospects could inevitably lead to discontent among youth, and a perceived failure to provide for their material well-being could jeopardize the Communist Party’s social contract with the people of China,” said Shehzad Qazi, executive director of China Beige Book.
Given that China’s aging and shrinking population will reduce the number of economically active population, the impact of youth unemployment and underemployment could “potentially have a very negative impact on the economy,” Colombia’s Lu told CNBC.
Although China is not the only society in the world suffering from double-digit youth unemployment, according to statistics from the International Labor Organization, few others realize the magnitude of the Chinese problem.
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The Chinese central government is very aware of this problem.
In April, China’s State Council announced a 15-point plan aimed at making jobs more compatible with young jobseekers. These include support for qualification measures and internships, a commitment to a one-off increase in hiring figures for state-owned companies and support for the entrepreneurial ambitions of university graduates and migrant workers.
Structural discrepancy
Resolving more fundamental discrepancies is much more difficult, analysts say.
“In many societies, including China, there is usually a mismatch between the labor market and higher education institutions. They don’t necessarily talk to each other,” Lu said. “Universities have some sense of what the job market is like and what employers are looking for, but often their understanding is outdated and can be biased from time to time.”
There is also a mismatch between the changing expectations of more educated young people and an economy that is not keeping up with their expectations.
With youth unemployment at record levels in the world’s second-largest economy, China’s young people face weaker economic gains.
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“Due to the rapid growth in education for both men and women, these young people are no longer willing to return to factory jobs,” said Jean Yeung, professor of sociology at the National University of Singapore.
Even as youth unemployment rises, China projects that nearly 30 million manufacturing jobs could remain unfilled by 2025, according to the country’s Ministry of Human Resources and Social Security. That’s almost half of all jobs in the industry, the ministry said.
“But the plan envisaged that China’s economy should transform from a labor-intensive industry to a technologically more powerful, with a strong service-oriented knowledge economy,” Yeung added.
According to Qazi, however, this transition appears to be half-hearted in China’s state-run economy.
Economists say a thriving, service-based economy relies on private sector support. The problem, however, is that small and medium-sized businesses do not have access to credit.
“Until then, there will be no private sector services that would really be able to take in these young graduates who want to work in the new industries, the industries of the future, and then be able to make this massive economic shift .” said Qazi. “It’s all connected.”
cyclic problems
China’s “zero Covid” policy during the pandemic led to factory closures and a two-month lockdown in the financial capital Shanghai last year as the broader economy stalled.
According to Goldman Sachs, the slowdown in the service sector earlier in the year, ahead of China’s reopening, may have contributed to the current high youth unemployment rate.
However, analysts at the US investment bank expect China’s youth unemployment to peak in the summer months of July and August due to the influx of fresh college graduates.
Economists at Goldman Sachs say that reintegrating young people into the labor market would support China’s economic recovery by restoring the purchasing power of young people, a demographic that typically accounts for nearly 20% of consumption in China.
However, the jobs may not match their aspirations or education.
“I find it ironic that nowadays, for most college graduates, a college degree is no longer enough to get a high-skilled job,” Lu said.
“But at the same time, it becomes unnecessary because everyone else gets it.”
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