China’s urban youth unemployment rose to 19.9 per cent, according to the latest data from China’s National Bureau of Statistics. This figure represents a record high (since the government began publishing this data in 2018) and a significant jump from the 12.2 per cent in December 2019 when COVID was first identified.

Tepid economic growth and a structural mismatch in the labour market are why so many young people are out of work. A large, restive youth population can challenge the political and social status quo, which the Communist Party wants to avoid.

Weak labour market

Slowing economic growth, COVID disruptions and uncertain outlooks in key sectors are behind the weak labour market demand.

China’s economic growth has decelerated in recent years as the export and investment-led economic model can no longer support rapid economic growth. One immediate consequence of the slowdown is that fewer jobs are being created than in the past.

Three years of COVID-related disruptions have made the matter worse. Stringent pandemic policies have taken a heavy toll on the Chinese economy, including hampering supply chains, transportation, retail, tourism, etc. Many employers are not hiring; others are shedding staff.

Moreover, uncertain outlooks in key sectors have compounded the problem. Beijing’s recent regulatory crackdown has created uncertainty in the internet technology sector. In the private education sector, all but the biggest companies went under after Beijing effectively banned for-profit after-school tutoring. And the ongoing real estate and mortgage crisis risk spilling into the broader economy.

Structural mismatch

The other main driver of urban youth unemployment is the structural mismatch in the labour market. There are too many university graduates searching for jobs for which there are too few positions. And yet, at the same time, there is a shortage of factory and technical workers.

This structural mismatch has its roots in the massive education expansion that took off in the late-1990s. The Chinese government expanded higher education enrollment to support the country’s economic development. Between 1998 and 2020, higher education enrollment increased from under five million to over 40 million.

For 2022, the Ministry of Education estimates that there will be a record high of 10.8 million higher education graduates. They will be competing with students returning from overseas studies and graduates from previous years who have been delayed entering the job market by COVID.

Beyond economic trends and the labour market mismatch, Chinese society has deep-seated prejudice against manual labour. Parents want their children to gain a university qualification to escape the physical toll and low wages that come with manual labour jobs. Even though the Chinese economy needs skilled workers and the Chinese government has been promoting vocational training and education, the social prejudice towards manual labour remains widespread.

Implications

What are the implications of high urban youth unemployment?