China’s Youth Unemployment Crisis: Addressing Underemployment and Economic Mismatch

(CTN News) – China faces a significant challenge as youth unemployment reaches a record high, leaving college graduates caught in a perfect storm. Many are forced to settle for low-paying jobs or positions that do not utilize their skills.

With urban employment among 16- to 24-year-olds soaring to 20.4% in April, four times higher than the broader unemployment rate, the economy is struggling to keep up with the increasing number of college graduates.

The misalignment between the demand and supply of high-skilled workers has created a situation where underemployment is rampant, forcing graduates to accept jobs below their qualifications and training.

The Rising Tide of Underemployment

According to research by Yao Lu, a professor of sociology at Columbia University, and Xiaogang Li, a professor at Xi’an Jiaotong University, an estimated quarter of college graduates in China are underemployed, exacerbating the already high youth unemployment rate.

Underemployment occurs when individuals accept low-skilled, low-paying, or part-time jobs due to the scarcity of full-time employment opportunities that match their skills.

Previously, such positions were predominantly filled by non-college-educated individuals, but now college graduates are increasingly forced to take them.

The Lingering Impact of Economic Downturns

Historically, graduating during periods of economic recession or downturn has long-lasting consequences on the earnings of college graduates.

Stanford University research reveals that individuals who start their careers during such challenging times earn less for at least 10 to 15 years compared to those who graduate during periods of prosperity.

This scarring effect further exacerbates Chinese youth’s challenges as they enter the job market amidst economic difficulties.

Implications for the Chinese Economy and Society

Data from China’s Bureau of Statistics indicates that of the 96 million 16- to 24-year-olds in the urban labor force, 6 million are currently unemployed.

This represents an additional 3 million unemployed urban youths compared to the period before the COVID-19 pandemic, as estimated by Goldman Sachs.

The Chinese government recognizes the urgency of addressing this issue, as diminished job prospects could lead to dissatisfaction among the youth and potentially disrupt the social contract between the Communist Party and the people.

Furthermore, given China’s aging and declining population, the consequences of youth unemployment and underemployment could have severe negative ramifications for the economy.

Challenges and Solutions

Addressing the fundamental mismatches between the labor market and higher education institutions presents a significant challenge. The disconnect between universities and employers leads to outdated and distorted understandings of labor market demands.

Additionally, evolving expectations of highly educated young people outpace the economy’s ability to provide suitable opportunities.

While China aims to transition to a service-oriented, knowledge-based economy, the focus on such a transformation remains inadequate in the state-driven economic structure.

The Role of the Private Sector and Economic Recovery

Economists assert that a thriving services-driven economy requires support from the private sector. However, small- and medium-sized companies in China struggle to access credit, hindering the absorption of young graduates into future industries.

The “zero Covid” policy implemented during the pandemic, which led to factory closures and lockdowns, contributed to the slackening of the services sector.

Goldman Sachs economists predict that the youth unemployment rate will peak in the summer months with the influx of fresh college graduates, but getting young people back to work would contribute to China’s economic recovery and restore the consumption power of the young demographic.