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China is Falling Behind The Curve in Employing Young Work Force

Posted on February 22, 2014

Youth unemployment has created “a generation at risk” according to the International Labor Organization, with worldwide youth unemployment forecast to rise to 12.8 percent by 2018. But these headline figures do not necessarily tell the real story given the discrepancies among different parts of the world.

In the developed economies, the youth unemployment rate – unemployment among those aged 16 to 24- is approximately 18.1 percent. While the rate of Germany stands at 9 percent, those of the UK and the U.S. are 20 percent and 16 percent, while in Spain and Greece half of the young people are jobless.

Youth unemployment is highest in the Middle East and North Africa at 28.3 percent and 23.7 percent, respectively. By contrast, East Asia and South Asia have the lowest rates at 9.5 percent and 9.3 percent.

One may imagine that China – perhaps the world’s only economic powerhouse at this moment – would have a low youth unemployment rate. According to the official figures it does: youth unemployment stood at 4.1 percent in 2010. Yet this number must be taken with a grain of salt considering the Middle Kingdom does not use the internationally accepted metrics to measure such unemployment.

If we turn to other sources, the picture is rather different. For instance, a report prepared by the China Household Finance Survey in 2012 puts China’s youth unemployment at 8.1 percent. Others suggest that the rate to be as high as 20 percent.

Youth unemployment with Chinese characteristics

While the exact rate is up for debate, the underlying unemployment issue among the youth is not. Even though there is no specific data on the jobless rate of Chinese people in the 16 to 24 age group, the China Household Finance Survey suggests an unemployment rate of 9.6 percent for this age group. While this may not appear to be particularly high, a breakdown by education profiles reveals a worrying trend.

As shown in figure 1, those who are less educated are far more likely to be employed than those who are better educated. Put differently, there appears to be an inverse correlation between educational attainment and ease of finding employment, contrary to the U.S. and the UK where a higher level of education helps young people secure jobs.

This observation is perhaps not that surprising; China’s economic miracle has insofar been driven by three sectors: export-driven manufacturing, construction and large energy and capital intensive heavy industries dominated by the state, none of which offer large number of white-collar jobs suitable for university graduates.

By contrast, low-skilled workers with a primary and junior secondary education, especially young migrants from the rural China, can easily find jobs in the transportation, construction and catering industries. This is especially true in coastal provinces such as Guangdong and Fujian as well as major cities including Beijing and Shanghai. Indeed, currently these businesses are finding it tough to recruit and retain workers as demand is high and supply is low. This, in turn, has led to the continuing increase in wages.

This highlights a fundamental issue: youth unemployment in China is a structural rather than a cyclical problem – the country is not creating a sufficient number of high-quality positions to soak up its educated youngsters. Worse yet, the number graduates and the number of institutions of higher education have been on the rise over the past two decades. At the same time, most universities are more interested in pursuing revenue and growing themselves in size. The result is that there is little motivation to enhance the quality and the employability of their students.

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2 thoughts on “China is Falling Behind The Curve in Employing Young Work Force

  1. what is the one thing that reduces unemployment time and time again. war

  2. "At the same time, most universities are more interested in pursuing revenue and growing themselves in size. The result is that there is little motivation to enhance the quality and the employability of their students."
    This what is happening in the West as well, It's all about the bureaucrats not about the effect their selfishness has (unintended consequences) ! ! !