The most educated generation in Chinese history was supposed to lead the way to a more innovative and technologically advanced economy. Instead, an estimated 15 million young people are out of work and many are lowering their ambitions. Pessimism floods the mindset of Chinese Generation Z (centennials are those born around the turn of the millennium in 2000).
A perfect storm of factors has pushed unemployment among urban youth ages 16-24 to a record 19.3%, more than double the comparable rate in the US. The government’s hardline strategy has led to layoffs, while its has hit the private sector.
At the same time, a record number of university and vocational training graduates – some 12 million – enter the job market this summer. This highly educated cohort has intensified the mismatch between available positions and the expectations of job seekers.
The result is an increasingly disillusioned young population that is losing faith in private companies and is willing to accept lower wages in the state sector. If the trend continues, the growth of the world’s second largest economy will be affected. The number of unemployed under the age of 25 equates to a 2-3% reduction in China’s workforce, and fewer workers means lower GDP.
Unemployment and underemployment also continue to impact wages for years: A 2020 review of studies reported a 3.5% reduction in wages for those who had experienced unemployment five years earlier, Bloomberg reports. As more young people fill government positions, fewer may jump into new sectors and drive innovation.
“The structural adjustment that the Chinese economy is facing right now actually needs more people to become entrepreneurs and make efforts,” said Zeng Xiangquan, director of the China Employment Research Institute in Beijing. Lower expectations have “hurt utilization of the young workforce,” he added. “It’s not a good thing for the economy.”
About 39% of graduates listed state-owned companies as their top employer choice last year, according to recruiting company 51job. That’s an increase from 25% in 2017. Another 28% chose public jobs as their first choice.
It is a rational response in a labor market affected by the pandemic. All workplaces have been hit hard by China’s sudden lockdowns and strict quarantine measures, but private companies were more likely to lay off workers. Beijing’s main policy to boost employment has been to order the state sector to increase hiring.
President Xi Jinping may be relieved that the country’s unemployed youth are trying to join the government instead of overthrowing it. During a June visit to a university in southwestern China’s Sichuan province, he advised graduates to “avoid the situation where one is unfit for a higher position but is unwilling to accept a lower one.” “. He added that “getting rich and famous overnight is not realistic.”
The message is getting through: Graduates’ expectations for starting salaries fell more than 6% from last year, to 6,295 yuan ($932) a month, according to an April survey by recruiting firm Zhilian. State-owned companies increased in attractiveness in the same period, according to the contracting firm.
But lower income expectations and talent shunning the private sector are likely to dampen growth in the long run, defying the president’s plan to double the size of the Chinese economy from 2020 levels by 2035. at which point it would likely surpass the United States in size.
The expression tang ping (translated into English as lying flat and into Spanish as staying lying down) spread over the Internet in China last year. The slogan evoked the abandonment of the ‘rat race’ (race in vain) and the , and reflected a desire for a better work-life balance in the face of slowing growth in China. As the unemployment situation has worsened, many young people have adopted an even more fatalistic slogan: bailan (let it rot in English and let it rot in Spanish).
Chinese state-owned enterprises are not all unproductive colossi. But the economic data suggests that, in general, they are less efficient and less innovative than private companies. China’s economic boom has coincided with a decline in the share of public enterprise jobs in urban employment: from 40% in 1996 to less than 10% before the pandemic. This trend could now be reversed.
Last year, China launched a regulatory offensive in previously high-flying sectors dominated by private companies that once attracted ambitious young people. Internet companies were fined for monopolistic behaviour, real estate companies were deprived of funding and the private tutoring sector was almost completely shut down.
Regulatory filings show China’s top five publicly traded education companies cut their staff by 135,000 people in the past year after the crackdown. The biggest tech companies have kept their workforces steady, and Zhilian says more tech jobs were advertised in the first half of this year than in the same period of 2021. Still, the sector’s appeal has faded.
A graduate of the prestigious Central University of Finance and Economics in Beijing, Hu was prepared for the technology sector: she interned at three Internet companies, including the video-sharing giant Beijing Kuaishou Technology. But she has changed her mind. “People who go to work at Internet companies worry about themselves because they feel like they could be fired at any moment,” she told Bloomberg.
A young future Chinese civil servant: “The hours of my future work will be from 8:30 a.m. to 5:30 p.m., and the workload will be quite light”
Instead, Hu got a job at a research institute of the state-owned China Telecom. “My future job hours will be 8:30 a.m. to 5:30 p.m., and the workload will be quite light. Internet companies consume too much,” she reveals.
In addition to the shift of talent to state-owned companies, there is another mechanism at work that may hurt growth in the long run. Studies in the US, Europe and Japan have shown that the more time young people spend unemployed early in their careers, the worse their earnings are in the long run, an effect known as “scarring.”
The state sector already employs some 80 million people and the number could grow to 2 million in net terms this year, according to Lu Feng, a labor economist at Peking University. “But compared to the total job demand, it’s still relatively small,” he said. “We still need private companies to hire.”
That will only happen if the economy grows. To meet its jobs targets, economists say China needs GDP to rise between 3% and 5% this year. , with a very uncertain outlook due to the prospect of further closures to contain the spread of the coronavirus. “The lack of clarity on a zero-COVID exit strategy makes companies wary of hiring,” said Chang Shu, chief Asia economist at Bloomberg Economics.
Even if China can grow strongly again in the second half of this year, the problem of youth unemployment will persist: the rate has been rising since 2017, reaching 12% before the pandemic. Economists attribute this to two factors: urbanization and the mismatch between the education system and the needs of employers.
The hundreds of millions of workers who moved from the countryside to the cities used to return to their towns during downturns in the labor market, acting as economic buffers. Now, younger migrants stay in place when they lose their jobs, increasing urban unemployment.
“Many of them haven’t even grown up in rural areas. So they think of themselves as urban people,” says Lu, from Peking University. “The constraints on the government have changed substantially, it’s more difficult than in the past.”
Second, the annual number of graduates in China has increased tenfold in the past two decades, the fastest expansion of higher education anywhere in the world, at any time. The proportion of Chinese youth attending university is now nearly 60%, similar to that of developed countries.
The number of vocational training graduates lags far behind those receiving academic degrees. Such is the stigma surrounding vocational training that students rioted last year when they were told their university was to be rebranded as a vocational school. Young people with higher education reject factory jobs.
That has caused manufacturers to complain about a shortage of skilled technicians. “There aren’t many people applying for those jobs, like an electrician or a welder,” laments Jiang Cheng, 28, an agent for electronics factories in central China.
In other sectors there is an excess of requests. According to a 2021 study of 20,000 randomly selected job applicants on the Zhilian website, about 43% of job applicants wanted to work in the IT industry, while this sector only accounted for 16 % of hiring positions.
Half of job applicants had a bachelor’s degree, but only 20% of jobs required it. “There is now compelling evidence of overeducation,” the study authors wrote, warning that the mismatch “could have profound influences on both individuals and the nation.”
In the long term, government intervention is likely to get the private sector to hire again, while education reforms and market forces can smooth labor market mismatch.
The ideological factor
China is softening its regulatory campaigns, and a vocational training law passed this year aims to improve standards. A study by Wang Zhe, an economist at Caixin Insight, found that college majors that attracted a wage premium in 2020 became more…
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