Under China’s centrally-planned economy, one of the key tasks of the government was to ensure full employment by providing every urban resident of working age with an “iron rice bowl,” an unbreakable employment package that would in theory look after them and their family from cradle to grave. Urban residents were allocated by the local government to a work unit, which not only provided them with a job for life, but also their housing, medical care, old-age pension, and education for their children.
As the economic reforms of the 1980s and 90s progressed, the central government gradually relinquished its control over the employment system. Government controlled job allocation declined sharply from 76 percent to 52 percent of the total job market between 1980 and 1992. From 1992 onwards, the old system of employment allocation was largely restricted to college graduates and to the placement of jobs in China’s remaining state-owned and large-scale collectively-owned enterprises.1
As the government allowed greater freedom in the labour market, it largely abandoned its responsibility to ensure full employment. Unemployment began to increase significantly at the end of the 1990s, as the government’s big push to reform state-owned enterprises (SOEs) got underway. About 20 million SOE employees were made unemployed as enterprises restructured, merged or declared bankruptcy. The iron rice bowl was effectively smashed, and jobs for life were replaced by performance-based labour contracts.2; Those worst affected by these changes were poorly educated, unskilled workers who found it increasingly difficult to find new work. As a result, unemployment has become one of the central government’s most pressing problems.
1. Unemployment rates
China’s official unemployment rate has remained at between two to five percent for the last two decades, comparable to Hong Kong and Taiwan, and much lower than the rates in many European countries. Even in the late 1990s and early 2000s, when the effects of economic reform and SOEs restructuring were at their most intense, the rate barely exceeded four percent (Statistics: urban unemployment rates 1980-2007).
However, it is critical to note here that the official unemployment statistics only include urban residents who have registered as unemployed, and do not include rural labourers who have migrated to the cities in search of work or those left unemployed in the countryside. According to the State Statistical Bureau, unemployment only refer to urban residents who 1) posses non-agricultural residence card; 2) are within a certain age range (16 to retirement age); 3) are able and willing to work; 4) have registered with the local labour bureau for employment. (China Labour Statistical Yearbook, 2005)
Because of this highly restrictive definition, many jobless people, such as those “laid-off” from SOEs are not included because although they have no job they retain an “employment relationship” with their former employer. In addition, as one scholar from the Shanghai Academy of Social Sciences has pointed out: “The official employment rate of China covers only urban unemployment but excludes about 150 million surplus rural labourers. If these 150 million people are included, the unemployment rate could reach as high as 20 percent” in 2006.3
The State Council’s China Development and Reform Commission estimated that in 2006 there were 25 million people competing for only 11 million jobs in urban areas, indicating that 14 million people were unemployed, accounting for more than five percent of the total 283 million urban workforce. It further projected that in the next three years 3.6 million SOE employees would be laid off and another three million employees would be redeployed amidst the restructuring of subsidiary businesses.4 In 2007, the Minister of the Labour and Social Security (MOLSS), Tian Chengping projected that by 2010, the gap between urban registered unemployment and job openings would remain at around ten million.5
Unemployment is more severe in the poor western and central regions and the northeastern provinces which had a high concentration of SOEs. Enterprises in the southeastern coastal areas, such as Guangdong, and Shanghai, which opened up for foreign investment much earlier, were far more capable of providing employment opportunities to workers. In 2005, the highest official unemployment rate was five percent in a northeastern province, Liaoning; and the lowest in Beijing, at two percent, a very low rate compared with international standards (Statistics: unemployment rates by province).
Discrepancies in regional economic development led to many young people in less developed provinces seeking job opportunities in coastal provinces. Based on a study in the 1990s, Guangdong, Beijing, Shanghai, Tianjian and Jiangsu were the most popular destinations, while Hebei, Anhui, Helongjiang, Zhejiang, Guangxi and Sichuan were the main sources of migrant labour.6 Although many migrant workers were able to find jobs in cities, they were subject to widespread discrimination and exploitation in their host cities.
2. Sources of unemployment
Changes in the rural workforce
China has been undergoing rapid urbanization, and since 1978, the number of cities has more than tripled from 191 to 661. The urban population has more than doubled from 18 percent in 1978 to 43 percent in 2005. Yet, compared with international standards, China remains at a pre-industrialized stage (Statistisc: international comparision of urban population). In 2005, the majority of China’s total workforce of over 760 million lived in rural settlements such townships and villages (Statistics: number and proportion of rural and urban population 1978-2005 and proportion of rural migrant workers in urban employment 2004).
Nevertheless, with China’s urbanization process accelerating over the last decade, more than 200 million people have left the land. The proportion of people working in primary industries has continued to fall (Statistics: proportion of employment by industry sectors 1952-2007), and MOLSS Minister Tian Chengpei suggested in 2006, that of the 497 million strong rural workforce, only 180 million were still working on the land, 200 million had switched to other industries, and about 100 million comprised the surplus workforce.7 Currently over 120 million rural workers are “on the move”, making their way into towns, as part of the “floating” migrant population known as nongmingong.
Laid-off workers
The reforms of SOEs left many workers unemployed (See statistics: number and percentage of SOE workers in all employment 1994-2005). The State Statistical Bureau defines “laid-off workers as “workers who have left their posts and are not engaged in other types of work in the same unit, but still maintain a relationship with the unit in which they have worked”.8 They are given only very basic living subsidies (shenghuo fei) instead of unemployment benefit, and they are not included in the registered unemployment rate. From 1999 to 2005, more than 21 million SOEs employees were laid off (Statistics: yearly increase of laid-off workers 1998-2005).
Although, the largest wave of SOE lay-offs is now over, those laid-off workers still exert significant pressure on employment. Many laid-off workers are middle aged, low-skilled, and poorly educated, and had been employed in traditional sectors such as coal, textiles and machinery. Lacking skills, they found it difficult to find a job in the new market economy. Despite various government schemes and incentives designed to encourage employers to hire laid-off workers, only 32 percent of workers who left the unemployment registry in 2005 were reemployed (Statistics: yearly decrease of laid-off workers 1998-2005).
Increase in the number people entering the labour market
Government officials such as the former Vice Minister of MLOSS, Wang Dongjian, have openly acknowledged that the unprecedented number of young people entering the job market in China is creating a severe employment crisis. A report jointly published by the China Development and Reform Commission and other bureaus in February 2007 estimated that between 12 to 13 million new workers would enter the labour market each year. Even if China retained its current economic growth rate, only eight million jobs would be created, thereby adding between four and five million young people to unemployment roster each year.9
Employment opportunities for college graduates have been decreasing since the 1990s. In 2003, 83 percent of new graduates were able to secure a job. The rate dropped to72.6 percent in 2005,10and 71 percent in 2007.11
According to the First Survey on Youth Employment conducted by MOLSS in 2005, the unemployment rate of the 15-29 years old was nine percent, of which 72 percent were long-term unemployed. While another survey indicateed that young people make up around 30 percent of the urban unemployed and laid-off populations.12 According to United Nations’ estimates, the proportion of the population aged between 15 and 59 in China will reach its peak and remain at a high level (more than half the total population) between 2110 and 2020, indicating that unemployment will continue to be a significant problem in the next two decades (Statistics: projected population in China 1950-2060).
Last updated, 14 December 2007
Endnotes
- Lee, G. and Warner, S. (2005). Unemployment in the People’s Republic of China. In John Benson and Ying Zhu (eds). Unemployment in Asia. London and New York: Routledge, pp. 97-114. (Top)
- Cheng, C.Y. (2004). China’s Quite Revolution: Process and Consequences. Journal of National Studies 4(1):1-30. Retrieved on 2 Dec 2007 at press.ntu.edu.tw. (Top)
- Zhang, C.C & Tian, K.C. (2006). “第3次就業高峰來臨 算上農村我國失業率高達20%” [The third peak of workforce is coming: the unemployment rate has reached 20 percent after rural unemployment is counted] , published on Nangfang Wang on 19 June 2006. (Top)
- Zhang, C.C & Tian, K.C. (2006). “第3次就業高峰來臨 算上農村我國失業率高達20%” [The third peak of workforce is coming: the unemployment rate has reached 20 percent after rural unemployment is included] , published on Nangfang Wang on 19 June 2006 ; China Development and Reform Commission (2007).” 2006年就業面臨的問題及政策建議”, [Problems and recommendations on employment issues in 2006]. Retrieved on 4 Dec 2007 at finance.sina.com.cn. (Top)
- “勞動和社會保障部部長:中國就業工作面臨五大問題” [Minster of the Ministry of Labour and Social Security: Five big problems that haunt China unemployment], published on Dongbei Wang on 26 Feb 2007. (Top)
- Heilig, G. (1999). Can China Feed itself? A System for Evaluation of Policy Options (Web Version). International Institute for Applied System Analysis. Retrieved on 3 Dec 2007 at iiasa.ac.at. (Top)
- “勞動部部長田成平指出：中國的就業矛盾非常尖銳” [Minster of the Ministry of Labour and Social Security: China’s unemployment problem is severe ], published on CE.CN on 15 Sept 2006. (Top)
- Chinese Labour Statistics Yearbook 1997: 588 (Top)
- China Development and Reform Commission (2007). “2006年就業面臨的問題及政策建議”[Problems and recommendation on employment issues in 2006]. Retrieved on 4 Dec 2007 at finance.sina.com.cn. (Top)
- Zhang, C.C. & Tian, K.C. (2006). “我國第三次就業高峰到來青年人失業數量巨大” [The third peak of workforce has come, unemployment of young people is severe]. China Economy Weekly. Republished on Population Information on 19 June 2006 at cpirc.org.cn. (Top)
- “應屆生找不到工作應多從自身找原因” [New graduates who have not found jobs should reflect on their own inadequacies]. Published in Aofu Wang on 1 Nov 2007. (Top)
- Zhang, C.C. & Tian, K.C. (2006). “The third peak of workforce has come, unemployment of young people is severe”我國第三次就業高峰到來青年人失業數量巨大. China Economy Weekly. Republished on Population Information on 19 June 2006 at cpirc.org.cn. (Top)