Why is China’s youth unemployment so high?

BEIJING - This year’s cohort of college graduates has been facing China’s toughest job market in recent memory.

Nearly one in every five young Chinese urbanites was unemployed in July, a record since data began to be released at the start of 2018. Their chances of finding a job have been hit by a perfect storm of economic disruption and uncertainty.

Covid-19 lockdowns have forced millions of firms to shut their doors, while regulatory clampdowns on the tech, property and private tutoring sectors have prompted massive waves of lay-offs. Below, Caixin explains the reasons driving the youth unemployment crisis, as well as how young people and policymakers have been responding to the job drought.

Why is youth unemployment so high?

Around 16 million people need to enter China’s urban labour market this year, Premier Li Keqiang said at a press conference in March. Among them are 10.76 million fresh college graduates, an increase of 1.67 million from 2021, according to education ministry data, setting a record in both the total number and year-on-year growth.

Youth unemployment usually peaks during graduation season, around July and August. While China’s headline jobless measure — the official surveyed unemployment rate for urban workers — was 5.4 per cent on average for the June-to-September period, unemployment among 16- to 24-year-olds was more than triple that at 19 per cent.

Yet these gauges miss some groups, including those who’ve not participated in the labour market for more than three months, suggesting the reality could be even direr. On the supply side, many firms are vanishing as they have borne the brunt of Covid-19 lockdowns and other disruptions that have exacerbated an economic slowdown, impacting demand for workers nationwide.

A total of 13.2 million market entities — including corporations, partnerships, as well as self-employed people and households — deregistered in China in 2021, up nearly 30 per cent year-on-year, according to the State Administration for Market Regulation. Newly registered market entities grew at a much slower pace of 15 per cent to 28.9 million for the period.

Meanwhile, the central government has launched regulatory crackdowns on sectors dominated by privately owned companies that previously employed millions of young people.

Internet giants have been hit with huge fines for monopolistic behaviour, the real estate sector has been mired in a year-long crisis of liquidity and confidence sparked by deleveraging policies, and dramatic reforms have all but wiped out the private education industry.

As the light at the end of the tunnel is yet to appear, companies have slowed hiring and implemented waves of layoffs.

Companies’ demand for fresh college graduates dropped 12.2 per cent year-on-year in the third quarter, while the total number of such job applicants soared 91.3 per cent, according to a report jointly released last month by the China Institute for Employment Research and Chinese jobs board Zhaopin Ltd.

How have young people reacted?

Young jobseekers have lowered their expectations.

Fresh graduates aim to get paid around 6,295 yuan (S$1,205) per month, down 6 per cent from last year, a Zhaopin survey conducted in March and April showed. Many of them prioritize stability, dropping dreams of high-flying private sector jobs and choosing safe careers in the state sector.

This year, almost 2.6 million eligible candidates signed up for the 2023 national civil servant exam, the test that one needs to pass to land a sought-after job in China’s sprawling bureaucracy, with only a one-in-70 chance of getting a coveted job, according to the National Civil Service Administration. This number of applicants is up 22 per cent from last year, when the chance was one in 68.

Some graduates opt for flexible employment, a broad term that covers various kinds of informal, temporary and “gig” workers, including construction workers, delivery drivers and livestreamers.

China’s flexibly employed has reached more than 200 million, Premier Li said in the March conference. The number constitutes roughly 14 per cent of the total population and 27 per cent of the entire working population, according to Caixin calculations based on government data.

What measures have policymakers taken?

Governments at all levels have been attempting to beef up youth employment through measures such as subsidizing companies that have hired fresh graduates, opening more public sector positions for them, supporting them starting their own businesses, and offering high salaries to those who are willing to work in less developed regions.

One long-term structural issue is the mismatch between companies’ demands and graduates’ skills and expectations. For instance, while graduates are reluctant to take on factory jobs, manufacturers face a shortage of skilled technicians.

Authorities have been trying to fix this imbalance through different means, including providing students with targeted vocational programs, and amending relevant law to elevate the status of vocational education.

CAIXIN DAILY