China’s Youth Unemployment Surges to New Heights 

The Youth Unemployment Crisis in China

Youth unemployment in China hit a record high in June, with an unemployment rate of 21.3% between 16 to 24-year-olds, which is approximately four times the national average. This situation is even more concerning as there are 11.58 million new graduates entering the job market this year, intensifying the competition for job vacancies.  

Young people are more vulnerable during economic downturns due to their limited work experience. The Covid pandemic significantly impacted service sectors, which normally employ more young workers, resulting in reduced job opportunities. While the economic activity in the services sector increased in the first quarter, rising demand may not be enough to counteract the rising youth unemployment rate. Analysts predict China’s youth unemployment rate will peak in July and August with the impending influx of graduates. 

The government’s ambitious plan to shift from a labor-intensive industry to a services-driven and knowledge-based economy can also be attributable to the high unemployment. While the goal is to create a thriving service-oriented economy supported by the private sector, access to credit for small and medium companies remains limited in China. Until that happens, the private sector will not be able to absorb individuals seeking employment in new industries, and then be able to have that massive economic transition. 

Underemployment adds complexity to the issue

Underemployment adds another layer of complexity to the issue, with at least an additional quarter of college graduates in China estimated to be underemployed. These individuals end up in low-skilled or part-time positions that do not align with their qualifications and skills, a stark contrast to their aspirations when pursuing higher education. Traditionally, such jobs were mainly occupied by non-college-educated workers, further highlighting the structural mismatch between the labor market and higher education institutions.  

One of the main causes of underemployment can be attributed to the phenomenon known as the “college bubble,” which refers to the rapid expansion of college education in the late 1990s, leading to a surge in the number of college graduates. According to Sociologist Yao Lu from Columbia University, “the economy has not caught up with the influx of highly educated individuals” (CNBC).

Addressing the Challenges and Moving Forward

Recognizing the severity of the problem, China’s State Council unveiled a 15-point plan on 26th April to aimed at improving the situation for young job seekers. The plan includes initiatives such as providing support for skills training and traineeships, expanding hiring at state-owned enterprises, and encouraging entrepreneurship among college graduates and migrant workers. Analysts assert that addressing more fundamental mismatches between the labor market and higher education institutions is necessary, even though these steps are a positive start.

To facilitate a successful transition for Gen Z graduates into the workforce, a multifaceted approach is necessary. Policymakers must focus on fostering a supportive environment for private sector growth, enhancing communication between educational institutions and the labor market, and providing targeted assistance to help young job seekers secure suitable positions. Additionally, investing in skill development programs and encouraging entrepreneurship can empower graduates to create their own opportunities in the evolving economy. 

Final thoughts

China’s record-high youth unemployment rate poses a challenge, but it also gives businesses an opportunity to rethink their talent management strategies and workforce planning.  

In particular, employers should not overlook the market expansion opportunities. Businesses can take advantage of the vast pool of skilled young talent in China by hiring at lower wage costs. This not only contributes to cost savings but also holds the potential to increase profitability. Moreover, with the ongoing shift towards a service-oriented economy in China, businesses that are able to identify emerging sectors with growth potential and develop expansion strategies will gain a competitive edge and achieve success in the dynamic Chinese market

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