Economy
Graduate jobs, rising wages forecast in China's economic changes
(Xinhua)
Updated: 2010-11-10 17:28
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NINGBO, Zhejiang - China's economy -- still struggling to create jobs for low-skilled workers -- will increasingly provide skilled work to the country's glut of unemployed college graduates as it shifts from a labor-intensive to an innovation economy, leading economists said Wednesday.
The creation of skilled employment was a priority and would work in favor of its millions of graduates -- but many would be forced to lower their salary expectations in the short run, Albert Park, professor of the economy of China at Oxford University, told Xinhua.
The Ministry of Education (MOE) said in July that about 1.76 million graduates in China were jobless, accounting for 27.8 percent of the nation's college students who graduated at the end of June.
"Graduate unemployment in China is only a short-term problem," Park said on the sidelines of the third annual Globalization and Economic Policy Center (GEP) conference in Ningbo, Zhejiang province.
"The Chinese economy will be able to absorb the rising number of university graduates," said Park, a long-time researcher of China's labor market, who attributed the capacity to the high rate of economic return on college education and the low ratio of graduates in the urban labor force.
The education dividend
"The rate of economic return to college education is very high. It has increased over time and there are no signs of it coming down yet, because there is still a scarcity of college graduates relative to the total labour force."
According to Park's research, the rate of return on college education -- measured as the percentage difference in wages for college graduates compared with high school graduates -- increased from less than 12 percent in 1988 to almost 40 percent early this decade.
"The ratio of college graduates to China's total urban labor force is below 10 percent, so there is still plenty of room for growth, especially when compared to the Republic of Korea (ROK), where nearly 90 percent of the labor force is college educated," said Park.
"The problem is that college graduates are being produced too quickly and the current labor market cannot absorb graduates fast enough," he said.
More than 6.3 million graduates swarmed on to the job market in the summer this year, up from 1 million in 1999.
The number of graduates from higher education institutions leapt from 9.5 million in 2000 to 37.8 million in 2006, MOE figures show.
Lower expectations
Many Chinese graduates had been prepared to wait for the right job, but that could be about to change, Park predicted.
"College graduates in China have high expectations. They are reluctant to accept low paid jobs and are quite patient when searching for the right one. However, it is a case of matching expectations with opportunities," he said.
Eventually they would have to lower their expectations, perhaps by accepting a low-level role in a small company and working to improve their position as the company itself moved up the technological chain, Park said.
"People in China do not change jobs as much as the workforce does in the United States and other developed countries, but there will be increasing opportunities for mobility in China, which will benefit the overall economy.
"There is also a growing emphasis on vocational training in Chinese universities, which will contribute to Chinese students being able to develop skills that make them more employable," Park said.
Eden Yu, associate dean and professor of economics at the College of Business, City University of Hong Kong, told the conference that China must accelerate its innovation drive.
"The capability of the Chinese economy to absorb millions of graduates a year lies in the drive to transform its economic development pattern," he said.
Pricing labor
However, Park and Yu both warned of an imminent labor shortage in China.
"There is no unemployment problem in China. Rather, the biggest challenge facing the Chinese economy is labor scarcity, which will result in considerable wage rises for the low-skilled labour force," said Park.
He believed the size of the potential labor pool in China's rural areas had been exaggerated.
"Many renowned economists often refer to a figure of 60 percent of people being primarily involved in agriculture. But this doesn't necessarily mean they are farming. A large number of them are doing other things like setting up small-scale businesses and diversifying," said Park.
"The young people are the ones that are really migrating. If people are staying in rural areas it is because they want to stay there. If they want to migrate, they migrate. They have reliable information on wages in the cities and the barriers to migration are very low. Chinese companies will have to raise wages to attract people to urban areas," said Park.
Yu and Park noted that fewer young people were willing to be village-bound in most of China's rural areas, even the poorest.
A limited resource
China's labor supply is still growing. Its working-age population will increase from almost 977 million in 2010 to about 993 million in 2015, according to US Census Bureau projections issued in December last year.
But the number of young people (15 to 24-year-olds) entering the labor force will fall by almost 30 percent over the next 10 years, according to the projections.
For years, businesses assumed that China had an almost unlimited supply of young people who would work for modest wages and be replaced at will, but the ageing of China's labor force has dramatically changed this.
A survey by Cai Fang, a researcher at the Chinese Academy of Social Sciences, found that 24 percent of rural villagers aged 16 to 30 migrated to coastal areas, compared with only 11 percent of those in their 40s.
Cai said in an article in the China Securities Journal last week that China's working age population had been falling by an annual rate of 13.6 percent, while actual wages of migrant workers were rising by 10.2 percent each year, and he expected wage increases to accelerate in coming years.
"Labor supply will start to decline around 2015," said Park. "We are right at the tipping point now where the dependency ratio has increased significantly due to a rapidly ageing population caused by the one-child policy."
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"Rising labor costs would neither necessarily result in the loss of labor advantages of an economy nor slower economic growth, so long as the wage increases are accompanied by growing productivity," Park said.
"Chinese firms will be able to raise productivity by retraining employees to use more advanced machinery.
Chinese workers are hard working and disciplined. China has to hope young people are flexible enough to adapt to a more technical sector," he said.
"Taiwan did this successfully -- although on a smaller scale -- and managed to move up the supply chain," said Park.
The conference titled "Enterprise and Labor Market Adjustment in China's Transition" is being held at the University of Nottingham's China campus in Ningbo.