China: Not Enough Jobs for New University Graduates

April 3rd, 2014
in econ_news, syndication

Written by Yajing Tu, GEI Associate

Many are aware that U.S. college graduates have trouble finding work.  Recently Reuters reported that the official unemployment rate for recent graduates ranged from 3-4% for some majors up to 7-8% for others.  However, many recent grads are "underemployed", with 44% working in low-paying positions that do not require their education.  But the problem  in the U.S. is tame compared to China.

Chinese-college-graduates-looking-for-work-380x180
Chinese college graduates looking for work.

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Over the past 30 years, China's economy has experienced remarkable growth, which was guided by the central government's hybrid socialistic / market economy ideology. Although the economic takeoff greatly improved people's living standard, the issue of unemployment, especially for people with higher education degrees, is still a great challenge.

According to the data from China's Bureau of Labor Statistics, the unemployment rate for the first quarter of 2014 is 4.1%, compared to 6.7% in the United States. As one of the most rapidly China-young-adult-unemploymentgrowing economic powerhouses in the world, China possesses relatively lower unemployment than the developed western economies.

But the story for new university graduates is hidden in the overall numbers. In China, the unemployment rate of college graduates in 2013 was 16.4%, and unemployed college students account for over a half of the entire unemployed labor. More than 3 out of 10 students are unable to find a job in the labor market upon graduation. On the contrary, it is much easier for people who receive less-than-12-year-education tend to start their professional careers. This might raise a controversial discussion to question China's education system or the quality of the education that people receive.

The dilemma can be partially explained through globalization and the international division of labor. On the global production line, which contains product design, raw materials procurement, manufacture and transit, order processing, wholesale, and retail, China can only participate in the manufacturing step due to the lack of original innovation and intellectual property protection. On the other hand, there is no obvious distinction associated with the education system between developing and developed countries. Universities in China concentrate on educating students with very general knowledge. Therefore, the mismatch between employment needs of companies and students' skills is the essential reason of such unemployment.

Because of the unbalanced growth of manufacturing, insufficient development of the other segments with higher pay and professional skill requirements, and unfair investment allocation, the lower educated people with lesser levels from education are finding it easier to find a job involving simple and repetitive manufacture processes.  Those with college training, who are skilled in effectively accomplishing the more complex core parts of the product chain, generating more value, cannot obtain the right position under the current Chinese economic situation. Moreover, the positive correlation between highly educated people and high unemployment rate is common in developing countries, not just in China. To escape this condition China must evolve a more complete economic system, one that is not so heavily focused on manufacturing.

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