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Employment

Employment in China

Providing employment for everyone of working age in China has been a consistently high priority for the central government in Beijing. Employment is regarded not merely as a means by which citizens can earn a living but equally importantly as a guarantee of social stability and control.

During the era of state-run economy, the goal of full employment was easier to attain. In urban areas, workers were simply assigned to a work unit, which was supposed to provide them with an “iron rice bowl”; a job for life, housing, medical care and a pension. Little attention was paid to whether or not the job was necessary in terms of enterprise efficiency or productivity. The work unit was primarily a means of social control. All employees and their families could be closely monitored and their movements constrained. Moreover, the urban population was kept relatively low, usually at less than 20 percent of the total, by restrictions on the movement of rural labourers to cities.

With the liberalisation and expansion of the economy in the 1980s and 1990s, the inefficient and unproductive work unit system could no longer be sustained and tens of millions of workers in state-owned enterprises (SOEs) were laid off. At the same time, the private economy was expanding rapidly, and rising demand for labour led to the relaxation of population controls. The result was the migration of hundreds of millions of rural labourers to work in urban factories and construction sites.

The Chinese government adapted to this radically different reality in the 1990s and sought to maintain social stability primarily through rapid economic growth. It was believed at the time that double-digit growth in and of itself would be sufficient to guarantee social stability in China. In recent years, however, it has become apparent that growth alone is not the answer. Social divisions and tensions are increasingly apparent and there is a serious imbalance in the labour market, with labour shortages in some sectors and an over- supply of labour in others.

The new administration of President Xi Jinping and Premier Li Keqiang has acknowledged the need for a change in economic policy, laying a greater emphasis on social welfare and environmental protection. However, it will take several years for any reforms to effectively rebalance the labour market.

Employment demographics in China

In 2012, China’s total population stood at 1.35 billion. The working age population (those aged between 15 and 59 years) was 937 million, down 3.45 million from the year before. This was the first time since records began in the People’s Republic that the working age population had actually decreased.

Out of this working-age population, 767 million were employed, according to statistics released by the Ministry of Health and Human Resources, an increase of 2.84 million compared with 2011. There were 371 million people employed in urban areas, an increase of 11.9 million over the previous year, accounting for 48.4 percent of the overall working population. From 2008 to 2012, the number of workers employed in urban areas has steadily increased while employment in rural areas dropped by six percentage points over those five years. See graph below.

The urban and rural workforce in China


Source: MOHRSS

Since the large-scale and radical reform of SOEs in the late 1990s and early 2000s, the number of SOE employees in China has remained relatively stable at just over 60 million. However, the majority of workers currently in SOEs are most likely not directly employed by the enterprise but rather by an employment agency created by that enterprise as a means of cutting costs. At the same time, there has been sustained growth in employment in private and foreign-owned businesses as well as the number of self-employed. The number of private enterprise employees in urban areas shot up from 45.8 million in 2008 to 69.1 million in 2012. The number of self-employed workers in China increased by 44.8 percent to reach 52 million. And a further 5.7 million jobs were added in foreign, Hong-Kong-, Macau- and Taiwan-owned enterprises. See chart below.

Working Population by Form of Ownership

Source: China Statistical Yearbook 2012

As expected in a rapidly developing economy, the proportion of workers employed in primary industries, agriculture, mining etc. has declined steadily over the last two decades, while the proportion of workers employed in secondary and tertiary industries increased. In 2012, around 33.6 percent worked in primary industries, 30 .3 percent in secondary industries (manufacturing and heavy industry) and 36.1 percent in tertiary industries such as services, finance, information technology, sales etc.

Working Population by Sector 1990-2012


Source: MOHRSS

As China's birth rate declined due to family planning restrictions in the 1980s and 1990s, the number of new employees entering the workforce also started to decline in the following decade. At the same time, students started to stay in school longer rather than seek employment directly after graduating from middle school. In addition, China’s rapidly expanding economy created a higher demand for workers in industries such as manufacturing and services that have traditionally relied on workers in their late teens and early 20s. These factors have combined to create acute labour shortages in Guangdong, Zhejiang and other major manufacturing hubs as factories, shops, restaurants and hotels all struggle to hire and retain staff.

The response of the factories in the south-eastern coastal provinces has been either to raise wages and improve working conditions or to relocate to areas where labour costs are lower. Thousands of businesses in low-cost, labour-intensive industries such as garments, shoes and toys have already closed or relocated to Southeast Asia and the Chinese hinterland. Wage levels in the remaining factories have increased by about 50 percent from 2010 to 2013 but many smaller businesses still struggle to attract young migrant workers and most now have no option but to take on older workers to fill the void. See chart below.

Age distribution of migrant workers (%)

Source: National Bureau of Statistics

However, as the above chart also shows, the job market for older migrant workers, especially those over 50, is still tight. See below for more details.

Unemployment

Despite rapid development and severe fluctuations in the labour market, China's unemployment rate has remained suspiciously stable at around its current level of 4.1 percent for the last decade or so. Even when an estimated 20 million migrant workers were laid off in the wake of the global economic crisis in 2008, the official unemployment rate only increased to 4.3 percent or about ten million workers.

China’s Official Unemployment Rate (2003-2012)

Source: MOHRSS

This is because the official unemployment statistics only include urban workers who have registered as unemployed. Urban workers make up less than two thirds of the urban working population. They have better job security than migrant workers and are less likely to be fired during company restructuring or downsizing. Moreover, many of the most secure positions, those in government and public institutions, are reserved exclusively for those with a local urban hukou.

A more accurate estimate of China’s unemployment rate is that of the Southwestern University of Finance and Economics’ 2012 survey which takes into account the migrant worker population and puts the national unemployment rate at eight percent; double the official figure.

There are currently two main groups of workers in China that have particular difficulty finding work; college graduates and the unskilled elderly. The rapid expansion and commercialization of China’s higher education system over the last decade or more has created a huge over-supply of graduates whose skills or lack thereof render them unsuitable in the current job market. Likewise, there is limited demand for unskilled workers in their 40s and 50s, although this situation is slowly changing as fewer younger workers are willing to take low paid jobs and employers have no option but to hire older workers to fill those positions.

Graduate employment

A record number 6.9 million students graduated from college in 2013, up 190,000 from the year before. However, the number of jobs that require a college education fell by around 15 percent in some cities. In Beijing for example, 229,000 students graduated in 2013. But according to data from hiring businesses and organizations, there were only 98,000 jobs available for graduates, 16,000 fewer than in 2012.Commentators dubbed 2013 “the worst year to graduate in history.”

One report on graduate employment showed that as of April 2013, only 32 percent of graduates from the higher vocational schools , 35 percent of those in undergraduate programmes and 26 percent of those in master programmes had secured employment, all these rates were at least ten percent lower than the figures in 2012. The employment rate after half year for the class of 2012 by contrast was 90.9 percent, slightly higher than the percentage in 2011 (90.2 percent). Among the in 2012 graduates, 82.4 percent had full-time or part-time jobs, two percent were self-employed, and 8.5 percent were unemployed.

Not only are the number of jobs for graduates limited, the salaries and benefits offered in the available jobs are relatively low. One survey found that the average monthly income for those graduating in 2012 was just 3,048 yuan, an increase of 282 yuan from 2011. Another survey in 2012 revealed that the monthly incomes of new graduates were basically comparable with those of migrant workers with a middle school education. The results showed that about 69 percent of graduates earned less than 2,000 yuan per month in their first job.

Company recruiters and human resources managers routinely complain that college graduates are fundamentally unsuited to the current job market and have unrealistic expectations about salaries, working conditions and career development. Employers complain that graduates can be over-confident and unwilling to compromise. As one recruiter in Shanghai put it, “college graduates these days think they’re really special. The problem is they’re the only ones who think that.”

In May 2012, the MOHRSS issued a circular outlining a series of measures aimed at making graduates better-informed and better-equipped to deal with the realities of today’s job market. It suggested creating a registration system for unemployed graduates to better relay information about job openings and making career fairs more specialized. Career counselling services would be provided to all registered unemployed graduates, allowing them to better understand and cope with the demands in the labour market through seminars and mock interviews.

In addition, the authorities have vowed to revamp the vocational college system in China and bring it more into line with the actual needs of business. Several local governments have already pledged to provide free vocational training for students in those industries most in need of skilled labour. Graduates in many regions are also encouraged to set up their own business. For instance, those setting up their own business in Guangdong will be exempted from administration fees and can apply for a low-interest loan of up to 100,000 yuan and other subsidies.

Since 2005, the central government has organized a program designed to encourage graduates to work in rural areas and support the development of agriculture, healthcare and education, as well as combat poverty. Graduates participating in the "three supports and one assistance" (三支一扶) program receive subsidies and assistance in finding employment. According to MOHRSS, 28,400 college graduates took part in the programme in 2012. However, in 2013, 7,387 graduates from Guangxi alone applied for the program, an increase of 38.1 percent over the previous year. On average, 14 candidates competed for one vacancy.

Elderly workers

In 1990, the average life expectancy in China was 68.6 years. In 2000, it had risen to 71.4 years and in 2010, it stood at 74.8 years. In major cities like Beijing and Shanghai average life expectancy had already reached 80 years in 2010.

Despite living longer, people in China are not necessarily getting richer. Many elderly people have insufficient pensions or no pension at all, forcing them to seek additional work just to get by. However, workers who are beyond the statutory retirement age are not necessarily protected by the Labour Contract Law and are therefore even more vulnerable to exploitation. In 2011, for example, the Chinese media reported how a 65-year-old widow was forced to find work on a construction site in order to pay off medical debts accumulated during her late husband’s long illness. The contractor for the project had promised her 6,000 yuan for her back-breaking work but after 82 days on the job, he had not paid a single cent.

For many workers, however, finding or staying in a job becomes difficult well before they reach the official retirement age. Age discrimination is deeply ingrained in the workplace in China and unskilled and low-skilled workers in particular find it increasingly difficult to secure employment after the age of 40. Indeed, many recruitment advertisements for low-skilled positions specifically exclude workers aged over 35. As their physical strength, stamina and alertness declines, older workers are effectively excluded from relatively higher paying jobs on the factory production line, construction sites and other labour intensive positions because employers think they will slow other employees down and reduce productivity. Many older workers can only get low paid and irregular jobs in small family workshops or as security guards, sanitation workers, hospital porters etc.

To highlight the problems faced by even well-qualified elderly workers, Lu Zhangong, Secretary of Henan Provincial Party Committee went to a local job fair to apply for a job but his application was always turned down as soon as he revealed his age of 59.

Elderly workers who have been injured or disabled at work are even more disadvantaged and many cannot find any work at all and have limited or no assistance from the state. Pang Jinpeng (see photograph below) has not been able to work since 1977 when, aged just 19, he was hit by a tanker at the state-owned coal mine he was employed at. He was paralyzed from the neck down and has spent most of his adult life confined to his home in the central province of Hebei.

Pang Jinping and his wife at home in Hebei, May 2013. Photograph by CLB.

In 1987, Pang agreed to a one-off compensation deal from the mine company of just 23,500 yuan.

“I was fooled by my employer back then,” Pang explained. The company representative had told him the mine would close down, so he felt he had no option but to accept.

The money was soon spent on medicines and disability care. He now lives off a subsistence allowance of 2,400 yuan per year, plus his wife's 5,000 yuan per year earned from farming.

There are entire families in China unable to find work. In 2012, there were 22,000 officially registered “zero-employment families.” The government has unveiled a number of employment promotion measures for such families, including retraining, job-hunting consultation services, financial assistance and advice in setting up a business. In 2012 it was reported that 18,000 households had already benefited from the campaign, with more than 23,000 workers finding employment.

Conclusion: Future prospects

On the surface at least, China has managed to maintain a reasonably high level of employment over the last few decades. High demand for cheap manufactured goods abroad, massive infrastructure development and rapid development of the service sector at home have all generated tens of millions of jobs.

However, cracks in the façade of full employment are beginning to show and they are likely to widen. Although the working-age population will almost certainly decrease in the coming decade, the low wage jobs that have driven China’s economic growth in the past could decrease at an even faster rate. Many low-cost, labour-intensive industries have already shifted substantial numbers of jobs to Southeast Asia, while the creation and supply of the high-skilled, value-added jobs the Chinese government covets has been constrained by the limited skills the labour market can currently provide.

To ensure continued high levels of employment and the development of a healthy labour market, China needs to:

  • Tackle employment discrimination. One of the biggest obstacles to an open and healthy labour market in China is the persisting widespread and widely tolerated practice of employment discrimination. (See section on employment discrimination.)
  • Provide more on-the-job training. Employers routinely complain that they cannot find suitable candidates but at the same time set unrealistic requirements and are reluctant to provide training for new workers or retrain older employees.
  • Ensure job-seekers understand and have realistic expectations of the job market. China’s higher education system has grown far too quickly and is dangerously out of sync with the job market. The education system needs to be consolidated and restructured so that students better understand their job prospects.
  • Ensure all workers have the social insurance they are entitled to. As the population ages, the need for decent pensions and healthcare will become ever more pressing. (See section on social insurance.)
  • Give workers greater say in their pay and working conditions through collective bargaining with management. Ultimately, the best way to ensure that workers get the right pay for the right job is to give the workers themselves a more prominent voice in the regulation of the labour market.