China’s Graduates Suffer Worse Employment Odds than US Graduates
China’s college graduates are quickly coming to a joint realization. This world is not the same as when their parents were their age. Employment odds are dim for both high school and college graduates, and while this problem is also becoming more prevalent in the US, it is far worse in China.
Because China’s economy is based around investment, and large government infrastructure projects are relied upon to boost GDP, China’s job market seems to demand more uneducated migrant workers than high school or college educated graduates. In fact, the more education you receive in China, the higher your odds of unemployment are. As counterintuitive as this may seem, upon a closer look at China’s economic structuring, it begins to make sense.
China’s service sector (or tertiary industry) is not developed. It has not had a chance to develop because of the lack of consumption in Chinese society. China’s GDP relies fairly equally on consumption and investment, making up 49 and 48 percent of GDP respectively. Compared to US data (around 30 percent investment and 70 percent consumption), it is easy to see that China’s economy is too centered around investment to develop a service sector that thrives on consumption. Jobs that are fueled by consumption include: education, finance, information services, etc. Jobs that are fueled mainly by investment are construction, mining, and manufacturing. Just looking at these two job lists, it is clear that China’s economic structuring, as compared to the US’s economic structuring, is not in favor of those with a higher education. Perhaps it is not fair to compare China to the number one economy in the world. Comparing the role of the service sector in China’s economy to other nations, it still ranks well behind England, Japan, and is relatively close to India. Because investment fuels the Chinese economy, and subsequently suppresses the service sector via consumption levels, it actually increases the unemployment rate for college graduates.
In China, civil service and jobs in the state owned enterprise sector (SOE) are the most sought after jobs, and getting a job in the sector is often referred to as making the golden rice bowl. This may seem a bit odd from an American point of view, where government jobs offer solid benefits, but generally lower wages. However, in China, salaries at SOEs average 48,357 RMB per year (around $7,876.39) per year, compared to only 28,752 RMB (around $4,683.13) per year at a non-government company. Furthermore, government owned companies have the luxury of offering retirement packages funded by the state. These retirement plans allow retired workers to continue earning 80-100 percent of what they earned while working, even though they are retired! Clearly, the incentive for Chinese graduates to seek government jobs is very high. However, with these incentives comes increasingly high competition.
The problem is that there are not enough of the jobs to satisfy the growing number of high school and college graduates. High school graduates’ applications to government sector jobs have increased 10 percent over the last ten years and the rate now stands at 14.1 percent. This year, 1,120,000 high school graduates applied for these jobs, and only 20,000 were accepted. That’s a rate of 1.7 percent. In other words, for every 200 high school graduates, there are only around three jobs available!
Further complicating matters, over the past twelve years college enrollment in China has increased six times over. The number of college graduates in China is unprecedented. These graduates also need jobs, and presumably are better qualified than the high school graduates who are already competing so viciously for government jobs. These government jobs are so valued, that currently more than a few college graduates choose to be unemployed and wait for a government job opening than take a job in the private sector.
So, when you’re having trouble finding an internship, reconsider just how lucky you really are.
This could present a big problem for China in years to come, as a growing unemployment rate represents more restless youth eager for change, and therefore a potential threat to government stability. It certainly is in the government’s best interest to get these graduates employed and build a consumption based economy rather than face the possibly grim alternative.
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