Unemployment among young graduates looking for work in China has risen to an all-time high, with the rate among young people aged between 16 and 24 hitting a record high of 20.4 percent in April, about four times the rate for the broader unemployment of all people who work. live in Chinese cities, which in April reached 5.2 percent, according to data from the China National Bureau of Statistics.
Despite the government ending the “zero Covid” policy last December, the youth unemployment rate remained high, reaching the highest level since China began announcing the statistic in 2018, as one in five young people is now unemployed.
According to a report recently issued by Goldman Sachs Bank, the record unemployment rate among Chinese youth stems in part from a mismatch between their specializations and available jobs, as the report indicates that graduates of vocational schools studying specializations such as education and sports increased by 20 percent in 2021 compared to 2021. 2018, while the education sector’s demand for new appointments declined significantly during the same period, and the information technology major witnessed one of the largest increases in the number of graduates between 2018 and 2021.
The report of the US investment bank, Goldman Sachs, suggests that the youth unemployment rate in China will reach its peak in the summer months (July and August) with the influx of new university graduates, indicating that returning young people to work will help China’s economic recovery because it will restore the consumer power of youth, which is a category A demographic that typically accounts for approximately 20 percent of consumption in China.
A classic case of resource misallocation
Tariq Al-Rifai, CEO of the Quorum Center for Strategic Studies in London, considers the problem of youth unemployment in China a classic case of misallocation of resources.
Al-Rifai added in his interview with “Sky News Arabia Economy”: “When China launched the industrialization boom in the eighties and nineties of the last century, it encouraged mass migration from rural areas to cities in search of higher-paying jobs, as well as the search for a better life, and this migration succeeded greatly. Well at the time of China’s growth, as we used to see the rapid growth in the Chinese economy during that period until the beginning of the year 2000.
An imbalance between the labor market and the number of university graduates
Since 2011, the Chinese economy began to witness a slowdown in growth, then we noticed a recovery in growth after the Corona pandemic, we noticed a recovery in growth, but growth is now much slower than it was, which led to an imbalance between the labor market, the number of university graduates, as well as people who do not They are still moving to cities in search of work, according to Al-Rifai, who confirmed that this problem will increase, especially since the Chinese economy is in a state of change, as China was a factory for the world due to resources and cheap labor, but this reality has changed now.
The CEO of the Corum Center for Strategic Studies indicates that some companies in China have begun to move to countries where manufacturing has become cheap, such as Vietnam and India, which means that the Chinese economy has become technologically advanced and has jobs with higher efficiency, and therefore it needs time to adapt to these variables.
Skills training support
Last April, China’s State Council announced a 15-pronged plan aimed at optimally matching jobs with young researchers. This includes supporting skills training, pledging a one-time expansion of employment in state-owned enterprises and supporting the entrepreneurial aspirations of university graduates and migrant workers.
6 reasons behind the worsening unemployment rate
In turn, the economist Dr. Abdullah Al-Shennawy points out in his interview with “Sky News Arabia Economy” to several factors that represent the reasons behind the exacerbation of the unemployment rate in China, which are:
- China cracked down on its education and technology industry, resulting in thousands of people losing their jobs and leaving companies and investors to suffer. Tightening oversight – during the pandemic – raised concerns about more government interference in the private sector, prompting companies to limit hiring.
- Industries that attract educated youth are shrinking, although the number of university graduates is increasing, with 11.6 million university students expected to graduate in June, an increase of about 820,000 from last year.
- The widening gap between the rate of pay young graduates are willing to accept and the rate companies are willing to pay it is this extent that reflects the mismatch in which the cost of living has outpaced the rate of salary growth.
- The unstable expectations of individuals about the Chinese economy, which leads to companies not hiring new people, while the Chinese economy is expected to strengthen in the coming months, but the recovery will remain weak until consumers feel full of confidence to make expensive purchases, which will push more companies to do with more employment.
- Insufficient development of China’s service sector, which has historically been a magnet for youth employment. Which we find an explanation for in the high rate of frictional unemployment, which occurs when individuals are working in jobs and looking for new job opportunities, which is usually more common among young people who have graduated from university education and have not found jobs yet.
- Medium and long term structural imbalance (contradictory) in the Chinese economy which explains the current imbalance between supply and demand for labor.
Corona restrictions limited travel and overwhelmed small businesses
For his part, economist Ali Hamoudi said in his interview with “Sky News Arabia Economy”: “The high unemployment rate among young people has been a problem in the Chinese economy for several years, and it was exacerbated by strict health restrictions as a result of the Corona pandemic that limited travel, exhausted small companies and hurt them.” damage to consumer confidence.
However, the Chinese government has introduced a range of policies aimed at stimulating youth employment, including subsidies for small and medium-sized companies that hire university graduates, as state-owned companies have been instructed to make more jobs available for those who have just started looking for work, according to Hamoudi.
Hamoudi explains that one of the reasons for the unprecedented rise in youth unemployment in China is the lack of compatibility between the jobs that university graduates want and the jobs available in the labor market, as young people with degrees in higher education are looking for jobs in the fields of technology, education and medicine, but these fields It is the one that has been growing slowly in China in recent years.
Youth unemployment threatens social stability
The economist Hamoudi explains that “youth unemployment is a problem for all economies because it costs the state to find job opportunities for them and benefits, but the biggest problem that goes beyond the issue of affecting economic growth is manifested in the threat to social stability, and the state must spend in new sectors that provide employment for young people in order to prevent this stability from being threatened.” Especially since we noticed the demonstrations that were led by young people against the closures caused by the Corona pandemic at the end of last year. This is perhaps the greatest danger facing China for this group.
The economist, Dr. El-Shennawy, suggests a package of measures that the Chinese government can take to alleviate unemployment, which are:
- Adopting stimulus policies and strengthening support for young people in their search for jobs, implementing the necessary policies to improve job opportunities and the stability of the labor market, and implementing public works programs.
- Providing graduate subsidies, maximizing human capital accumulation, and promoting skills training to guide young people to make career plans.
- Building a “buffer zone” for employment to ensure that short-term unemployment problems do not turn into long-term structural problems. This is done by providing information for career guidance and labor market adjustment programmes.
As for the package of procedures that must be followed by job seekers, they are as follows, according to Dr. Al-Shennawy:
- Graduates must show a degree of flexibility in choosing their occupations in order to enable effective allocation of human capital, due to their share of employment in government institutions.
- Lowering expectations for a graduate’s first job.
- Allocate more time for long-term career planning.
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