China’s Youth Unemployment
An emerging trend on Chinese social media platforms is the prevalence of posts by individuals who refer to themselves as “Professional Children.” The creators of these posts are young adults who, unfortunately, find themselves unemployed and living with their parents. Buzzwords such as “lying flat” and “letting it rot” have become popular on major internet platforms such as Weibo, Douban, and Xiaohongshu. These online discussions reflect the prevailing phenomenon in the urban area, including the major cities like Beijing, Shanghai, and Guangzhou. By June 2023, China’s youth unemployment rate had reached a historical high point of 21.3%, nearly double the pre-pandemic rate in 2019. What is worth noting is that this phenomenon predominantly affects young people, as the urban unemployment rate across all ages has remained stable at around 5.2% in 2023. The employment prospects for young workers aged 16 to 24 are so far from ideal that the Chinese officials suspended the data release on youth unemployment after June. A noteworthy detail is that college graduates with a bachelor’s degree make up 39.01% of the unemployed youths in urban areas, as stated in the yearly report published by the Chinese Academy of Social Science.
The COVID-19 pandemic and 3 years of “Zero-Covid” policy have played a significant role in the China’s rising unemployment and the whole-nation scale economic slowdown. However, the pandemic alone doesn’t explain the entire picture of the rising unemployment, specifically among the young, highly-educated people. In this blog, I hope to delve into two of the factors that have trapped young college graduates in unemployment and underemployment in China.
Factor I: Mismatch between the types of labor supplied and demanded
The jobs market presents a blunt disconnection between the available opportunities and young college graduate’s aspirations. These educated young people are aiming for white-collar jobs that demand professional skills. However, the entry-level positions in these fields are limited, while the number of graduates seeking these jobs is increasing every year. In 2021, the total number of college graduates across the nation had hit 8.3 millions, with the most popular majors being finance, civil, mechanical and electrical engineering, accounting, clinical medicine, law, and English language. These majors are oriented toward positions in service industries, including financial consultants, technology professionals, doctors, managers, and teachers. Unfortunately, the “Zero-covid” lockdown caused a mass shutdown of small to medium-sized businesses, discouraging entrepreneurship that could have provided more job opportunities. Moreover, the service sector, having already employed almost half of the nation’s labor force, has limited demand for additional labor. The integration of AI in the day to day industry’s operations diminishes the need for human employees in mid-level office jobs, further intensifying the competition in the job market. Employees have been working the notorious “996” (nine to nine, six days a week) schedule to secure their position, while a staggering 2.6 million applicants are competing for 37,000 entry-level government jobs.
In fact, the immediate labor market needs in China are not white-collar workers with extensive education backgrounds but rather skilled blue-collar and manual laborers in the manufacturing sector. Since the younger generations prefer the “comfortable and well-paid” office jobs, there is an aging trend in the manufacturing workforce. A research unit at Capital University of Economics and Business reported that nearly 50% of blue-collar workers are over 40. Additionally, more than one-third of the professionals on the government’s list of the top 100 jobs with the greatest labor shortages are manufactured-related jobs. In 2020, the average salary of the skilled talents and highly skilled talents in Shanghai was already 9% and 16% higher than the city’s average salary and 11% and 37% higher than the median of the general management workers. Although the high salary is highly incentivizing for switching to the manufacturing industry, the time and financial investment required for training and certifications prove challenging for recent college graduates. As a result, young individuals find themselves either in the rat race for limited white-collar positions that often pay less than anticipated or unemployed at home.
Factor II: Government Restrictions
The Chinese government’s tightening restrictions on the once-thriving industries reduces the labor demand, while the number of graduates who need jobs continues to rise. Since 2020, the government has imposed restrictions on high-tech, education, and real estate industries. High-tech companies, facing major crackdowns from the government, have had to downsize and lay off employees to survive. For instance, Alibaba, as a target, had to reduce 5% of its workforce in 2021. The education industry was also struck by the “double reduce” policy, which led to the closure of after-school institutions. As a result, the youth unemployment rate in the educational industry has reached almost 13% in 2023, compared to the 4.91% in 2019. Government-imposed restrictions forced companies to limit their hiring, making it even harder for new college graduates to secure employment.
Seeking way out
Burnt out by the overwhelmingly intense competition for white-collar positions, many young people choose to quit the race and take “light labor” jobs that require minimal skills, such as waiting tables and working as a cleaning crew. They voluntarily abandoned what were considered privileged office jobs due to dissatisfaction. Individuals who settled for low-skill and low-paying jobs that do not match their education level and skills are considered underemployed. According to Yao Lu, Professor at Xi’an Jiaotong University, at least a quarter of college graduates are underemployed on top of the rising youth unemployment. This underemployment has the potential to negatively impact the economy’s efficiency by failing to utilize the full potential of educated workers. Underemployed individuals could be subdued by the scaring effects of entering the depressed labor market.
The Chinese government has historically encouraged the younger generation to strive for a college education. However, given the prevailing underemployment among college graduates, the question arises as to whether the government should continue adding more unemployed intellectuals to the labor force. To alleviate the competition for white-collar jobs, the government should develop better technical schools and implement policies that encourage young people to explore diverse career paths. The Chinese government has already initiated programs providing financial and career support to outstanding technical school students from less well-off families. The effectiveness of these programs is worth anticipating.