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Job Pains and Gains

Young job seekers, facing an extremely competitive job market with sectors still struggling from pandemic-related effects, are adjusting their career expectations as governments roll out policy support. It is uncertain whether the changes are temporary

By Li Mingzi Updated Oct.1

On July 15, China’s National Bureau of Statistics (NBS) released the latest unemployment figures, with the surveyed urban unemployment rate, based on surveys rather than official registration, reaching 5.5 percent in June. Down from 6.1 percent in April and 5.9 percent in May, following a spate of Covid-19 outbreaks that caused the strictest control measures since 2020, the overall unemployment rate appears to have trended down in the past few months. “As the economy recovers and stabilizing policy measures take effect, China’s overall job market in the second quarter will improve further,” the NBS said.  

But what alarmed many analysts and the government is the unusually high unemployment rate among the youth population, which reached 19.3 percent in June for those aged 16-24. More than triple the overall unemployment rate, this was the highest youth unemployment rate since it was introduced in January 2018. 

Frictional Unemployment 
According to NBS spokesperson Fu Linghui, the exceptionally high youth unemployment rate is only “frictional” and thus temporary. “When youth enter the job market for the first time, they face the problem of frictional unemployment,” Fu told media at the press conference on July 15.  

The economic term “frictional unemployment” refers to a scenario when a person voluntarily becomes jobless in search of a new career, which tends to be temporary and is not necessarily a bad sign for the overall economy. Based on the rationale of frictional unemployment, the current high unemployment rate among young people results from the high demands of college graduates who choose to spend more time in the job market to land a job that meets their expectations.  

Fu’s comments immediately led to rebukes on social media, as many complained that his argument downplayed the real problems young people face. Most economists believe that while frictional unemployment may explain some of the unemployment problems, the major factors lie in China’s overall economic situation and the structure of China’s labor force.  

According to economist Professor Lu Feng from Peking University, the exceptionally high unemployment rate among those between 16 and 24 in recent months is because the job market is “flooded” with graduates from all kinds of schools, which coincided with unexpected waves of outbreaks caused by highly transmissible Omicron variants of Covid-19 that led to economic slowdowns around the country. Some 10.76 million students are expected to graduate college this year, a record high and 18 percent higher than in 2021.  

In addition, about a million youngsters will finish their overseas studies and return to join the job market this year, piling more pressure on the mid- to high-end job market, Shen Xiaofei, a veteran headhunter, told NewsChina. According to China’s Ministry of Science and Technology, the number of returned overseas Chinese students exceeded one million for the first time in 2021. 

Assembly Required 
According to Sheng Songcheng, a professor at Shanghai University of Finance and Economics, another reason behind the exceptionally high youth high unemployment rate is that a higher percentage of young people works in the service industry, which was hit harder by the global pandemic than other sectors.  

The service sector has been accounting for an ever-greater portion of China’s economy. Data from the NBS and China’s Ministry of Human Resources and Social Security show the service sector employed 48 percent of China’s entire labor force in 2021, up from 12.2 percent in 1978.  

Young workers have been leaving the manufacturing sector in recent years, which used to absorb the bulk of China’s young labor force. According to official data, about 70 percent of those between 16 and 24 worked in the service sector in 2019 and 2020, much higher than the ratio among the overall population. This disproportionally affected them as the service sector took a massive blow when local governments across the country launched strict control measures to deal with Covid-19 outbreaks. 

Among the service sector, tourism may be the hardest hit. According to a briefing released by the Ministry of Culture and Tourism in late 2018, China’s tourism industry employed about 28.3 million people, and an additional 51.7 million in related industries. In total, tourism provided jobs for approximately 10.28 percent of China’s entire labor force in the pre-Covid era.  

But as the Covid pandemic and associated controls drag on in China, many in tourism cannot see light at the end of the tunnel. According to a report released by the China Chamber of Tourism in February, only 13.8 percent of those in the industry have stable employment and 68.1 percent said they are jobless, 60 percent of whom said they have been unemployed for more than a year.  

During the Labor Day holidays, considered one of China’s two annual “golden weeks” for domestic tourism, the industry recorded an income of 64.7 billion yuan (US$9.6b), 43 percent less than in 2019. Chen Sihua, who operates a travel agency in Huangshan, also known as the Yellow Mountains, a UNESCO Heritage Site and one of China’s most popular travel destinations, told NewsChina that his company used to have over 50 employees but now has only 10.  

Challenged by the tough job market, some young job seekers returned to the manufacturing sector. Lin Zhijun, who owns a company in Changzhou, Jiangsu Province that manufactures horticultural machinery, told NewsChina there had been a sudden surge in young applicants to his company. “I’d rarely see a single young applicant the entire year, but this year we’ve interviewed about eight applicants under 30 in the past three months,” he said. 

Internet Sector 
Besides the struggling service sector, the once booming internet sector which supplied high-end jobs for millions of young professionals appears to be losing steam too.  

The internet sector’s growth has slowed considerably following years of high-speed expansion and the government’s anti-monopoly crackdown against internet giants in 2021. In the first quarter of 2022, Tencent, Alibaba and Baidu, referred to as the “big three” tech firms, reported profit declines of 6 percent, 24 percent and 10 percent.  

“The decline of internet companies is really being felt in the job market,” Shen Xiaofei told NewsChina. “There are now fewer vacant positions with more requirements.” Shen added that in the past he could help fill an open position by recommending 10 applicants on average. But now, he needs to recommend 20 or even 30.  

Meng Yu, who just graduated from a Beijing university with a degree in software engineering, told NewsChina that competition in the job market is fierce. Meng said she sent resumes to at least 21 internet companies, attended dozens of interviews and sat more than 10 written tests before she landed a job with a major internet company in July. Meng faced more competition not only from domestic graduates, but also returned overseas Chinese graduates. According to a report released in early July by recruitment platform liepin.com, internet giants are the favorite of returned overseas graduates.  

Given the tough job market this year, there appears to be a shift in mentality among college graduates. Internet companies are less attractive than ever. According to a 2021 report released by job listings platform 51job.com on the job prospects of college graduates, 80 percent from China’s elite universities listed State-owned enterprises (SOEs) as their preferred choice.  

A recent survey by zhaopin.com, another big recruitment platform, found class of 2022 graduates show rising interest in SOE jobs and declining attraction to the tech and real estate sectors. Analysts say it indicates young job seekers now put job security above other factors.  

In early May, the State Council announced measures to support the job market for graduates. Market analysts noticed the new policy package includes support for the development of internet-based platforms.  

In the meantime, both the market and graduates are adapting. According to a survey by zhilian.com, a job platform, more 2022 graduates are willing to work at SMEs and smaller internet companies offered nearly one million job vacancies in the first half of the year. 

College graduates crowd a job fair, Huzhou, Zhejiang Province, July 17, 2022

A job fair for overseas returnees, Yuzhong District, Chongqing, December 1, 2018

Turning Point 
In the past few months, the Chinese government launched measures to stabilize the economy and boost the job market. In February, China’s top economic planner, the National Development and Reform Commission (NDRC) outlined 43 measures to support the service sector, mainly through tax and fee reductions for companies.  

At the end of May, the State Council unveiled a policy package to stabilize the economy, which listed 33 measures including expanding the scale of tax and fee reductions, increasing fiscal expenditure, speeding up the issuance of the 3.45 trillion-yuan (US$510b) special bond quota, increasing infrastructure spending, boosting consumption, providing loan support to small and micro businesses and lowering the cost of financing.  

According to Liu Xiaoguang, a research fellow at the National Academy of Development and Strategy at the Renmin University of China in Beijing, the policy packages provide vital support to the service sector and could boost employment in the following months. “Accounting for about half of China’s economy, the service sector is the foundation of the stability of urban employment and a driver of new jobs,” Liu said.  

Liu said as Covid-related control measures are gradually phased out and the stimulus policies start to take effect, the service sector may witness a turning point in the latter half of 2022, which would help drive down unemployment rates.  

In the past months, governments in several localities launched measures to increase job vacancies in the State sector. In late May, Shanghai government released a notice requiring SOEs under its jurisdiction to allocate no less than 50 percent of its job vacancies to fresh college graduates. The government of Shandong Province pledged to reserve 60 percent of its SOE vacancies for recent college graduates.  

But as the State sector, including government agencies and SOEs, only accounts for about 20 percent of the labor force, the impact of these measures will be limited, said Professor Lu Feng.  

During a press conference on June 14 in Beijing, Xu Xiaolan, vice minister at the Ministry of Industry and Information Technology, told media that the key to solving the unemployment problem is to protect the development of China’s small- and medium-sized enterprises (SMEs). Xu said that by the end of 2021, 99 percent of China’s 48.42 million companies were SMEs, which account for 80 percent of urban jobs.  

According to an analysis of recent business registry data conducted by Zeng Xiangquan, director of the China Institute for Employment Research at the Renmin University of China, the ratio between the number of newly registered small and micro businesses and those that deregistered declined to 0.88 in 2021, the first time the index has dropped into the contraction zone, measured with a reading below 1 in the index. While the figure recovered slightly to reach 0.94 in March, it still shows an overall contraction in the sector.  

On July 31, the NBS released data showing that the Purchasing Managers’ Index (PMI), a measure of trends in manufacturing, for large, medium-sized, and small companies was 49.8 percent, 48.5 percent, and 47.9 percent for July, all of which are in the contraction range, with small businesses performing the worst.  

In an article released in March, Professor Liu Yuanchun, president of the Shanghai University of Finance and Economics, warned that the government should be aware that measures to stabilize the overall economy, which focus on critical industries, big companies and keynote projects, may not be as effective in supporting SMEs, which are key to stabilizing the job market.  

Liu Yuanchun pointed out that although the government has taken measures to stabilize the economy, including tax and fee reductions for SMEs, the much desired “trickle-down effect” has not taken place.  

Liu argued the biggest challenge SMEs face is lack of cash flow and uncertainty over future business prospects. Reducing taxes and fees alone cannot solve their problems. He said the government should take a more proactive approach to support them, including direct financial support and subsidies.  

The State Council’s policy in May for job market of graduates promised support for graduates, including more jobs at SMEs and SOEs, better treatment for graduates to work in less developed areas and incentives for graduate-led business startups.

A teacher provides one-on-one career counseling for students at Northeastern University, Shenyang, Liaoning Province, March 29, 2022