Record youth unemployment stokes economic worries in China

With youth unemployment rising to record highs in China, university graduates are caught in a perfect storm — some forced into low-paying jobs or subsisting in jobs below their skill level.

China’s urban employment rate for 16- to 24-year-olds hit a record 20.4% in April – about four times the overall unemployment rate, official data show, even as millions of university students are expected to graduate this year.

“This university bubble has finally burst,” said Yao Lu, a professor of sociology at Columbia University in New York. “The expansion of college education in the late 1990s created an influx of college graduates, but the supply and demand of highly skilled workers got out of whack. The economy didn’t keep up.”

The scourge of underemployment is another issue that China’s youth and policymakers must address.

In a paper co-authored by Lu and Li Xiaogang, a professor at Xi’an Jiaotong University, the professors estimate that, in addition to rising youth unemployment, at least a quarter of China’s college graduates are underemployed.

“More and more college graduates are taking jobs that are not commensurate with their training and qualifications to avoid unemployment,” Lu told CNBC.

Underemployment occurs when people settle for low-skilled or low-paying jobs, or sometimes part-time jobs, because they cannot find full-time employment that matches their skills.

“These jobs used to be mostly filled by people without college degrees,” Lu added.

The scarring effect of graduating during difficult economic times has been well documented in other societies. Research at Stanford University College graduates who start their working lives during a recession or downturn have been shown to earn less for at least 10 to 15 years than those who graduate during boom times.

Data from China Statistics Bureau Statistics show that among the 96 million urban laborers aged 16-24, 6 million are currently unemployed. Based on this figure, Goldman Sachs estimates that there are 3 million more urban unemployed youth now than in the period before the Covid-19 pandemic.

This is likely to add to the urgency for the Chinese government to act.

“Gloomy job prospects will inevitably stoke dissatisfaction among young people, while failure to ensure their material well-being could undermine the social contract between the Communist Party and the Chinese people,” said Shehzad Qazi, managing director of China Beige Book.

Given that China’s aging and declining population will reduce its economically active population, the impact of youth unemployment and underemployment could “could be very negative for the economy,” Columbia’s Lu told CNBC.

While China isn’t the only society in the world suffering from double-digit youth unemployment, few see the magnitude of China’s problem, according to ILO statistics.

The Chinese central government is well aware of this problem.

in April, China’s State Council announces 15-point plan Designed to better match jobs with younger job seekers. This includes support for skills training and internships, a pledge to expand state-owned enterprise hiring at one time, and support for the entrepreneurial aspirations of college students and migrant workers.

Analysts say addressing more fundamental mismatches is much harder.

“In many societies, including China, there is often a disconnect between the labor market and higher education institutions. They don’t necessarily communicate with each other,” Lu said. “Universities have some understanding of labor market conditions and employer needs, but their understanding is often outdated and can be distorted from time to time.”

There is also a mismatch between the changing expectations of better educated young people and the desire for the economy not to keep up with them.

“These young people are reluctant to go back to work in factories because of the rapid increase in the educational attainment of men and women,” said Jean Yeung, a professor of sociology at the National University of Singapore.

Despite rising youth unemployment, China expects nearly According to the Ministry of Human Resources and Social Security, there will be 30 million unfilled jobs in the manufacturing industry by 2025. That accounts for almost half of all jobs in the industry, the ministry said.

China’s ‘zero Covid’ policy during pandemic leads to factory closures and Last year, the financial capital of Shanghai imposed a two-month lockdown as the broader economy ground to a halt.