A Closer Look at Causes of Youth Unemployment in the People’s Republic of China

NO.247 JUNE2023 KEYPOINTS •ThelabormarketofthePeople’sRepublicofChinawashard-hitbytheCOVID-19pandemic,andthisparticularlyaffectedyoungpeople. ADBBRIEFS ACloserLookatCausesofYouthUnemploymentin thePeople’sRepublicofChina •Demand-andsupply-sidefactorscontributedtoahigheryouthunemploymentratethathasbeenaggravatedbymismatchesbetweentheskillsprovidedbycollegeeducationandthoseemployersneed. •Intheshortterm,itisimportanttostimulateeconomicgrowthandtopromoteservicesand theprivatesectortohelpcreatejobsforyoungpeople.Meanwhile,policysupportcanbeincreasedforlow-skilledmigrantyouth ShuaizhangFeng InstituteforEconomicandSocialResearch JinanUniversity AkikoTerada-HagiwaraPrincipalCountrySpecialistPeople’sRepublicofChina ResidentMission(PRCM)AsianDevelopmentBank(ADB) INTRODUCTION JingliangLu InstituteforEconomicandSocialResearch JinanUniversity WenQi AssociateEconomicsOfficerPRCM ADB andcollegestudentsfromlow-incomefamilies. •Inthelongterm,thegovernmentcancontinuetoimprovetheskillsofthelaborforce. ThePeople’sRepublicofChina(PRC),thecountrywiththeworld’slargestlaborforce(792millionin2021),facessignificantdemographicchallenges—notablyanagingpopulation,ashrinkinglaborforce,andadecliningyoungpopulation.Theshareofyoungpeopleisprojectedtodeclineinthenextdecades,andtheywillstaylongerineducationbeforeenteringtheworkforce.Thegrossenrollment rateintertiaryeducationalmostdoubledto58%in2021,witha28percentagepointincreasefrom2012. Atthesametime,youngworkersareincreasinglylikelytobeemployedinserviceindustries,workingforprivateenterprises,andholdinggigjobs,1whiletheshareofyouthemploymentinmanufacturinghasdecreasedsteadilyovertime. ISBN978-92-9270-183-3(print) ISBN978-92-9270-184-0(electronic) ISSN2071-7202(print) ISSN2218-2675(electronic)PublicationStockNo.BRF230205-2 DOI:http://dx.doi.org/10.22617/BRF230205-2 Note:ADBrecognizes“China”asthePeople’sRepublicofChina. 1Thegigeconomy“comprisesthreekeycomponents:independentworkerspaidbythe‘gig’ (anindividualtaskorproject),consumerswhoneedaspecificservice,andcompaniesthatconnecttheworkertotheconsumerinadirectmanner,includingthroughapp-basedtechnologyplatforms.Akeyfeatureofagigisthatitisatemporaryworkengagementandtheworkerispaidonlyforthatspecificjob.”AsianDevelopmentBankInstitute(ADBI).2022.StrengtheningActiveLaborMarkerPoliciestoDriveanInclusiveRecoveryinAsia.https://www.adb.org/publications/strengthening-active-labor-market-policies-to-drive-an-inclusive-recovery-in-asia. Thesedevelopmentsmadeyoungworkersmorevulnerabletotheimpactofthecoronavirusdisease(COVID-19)asemployment ismorevolatileandprocyclicalintheprivatesectorcomparedtothestatesector(FengandGuo2021),andtheconsumingserviceindustriesaremorepronetomajoranti-COVIDlockdownmeasures. TheCOVID-19crisisandrelatedmobilityrestrictionshaveseverelyimpactedthePRC’slabormarket,particularlyfortheyouth.Whiletheunemploymentrateforprime-ageworkers(25–59years)improvedswiftlyandfellnearlytoitsprepandemiclevelbytheendof2022afterpeakingat5.6%inFebruary 2020,therecoveryofyouthemploymenthaslaggedbehind(Figure1).Thesurveyedunemploymentrateforworkersaged16–24yearsaveraged17.6%in2022,upfrom11.9%in2019beforethepandemic. Thestructureofthisbriefisasfollows.ThisbrieffirstanalyzesthedrivingfactorsthatcontributedtothePRC’srisingunemploymentrateforurbanyouths,includingcollegegraduatesandrural-to-urbanmigrants,priortothepandemic,aswell astheimpactsduringthepandemic.Itthensummarizes currentgovernmentpoliciesinresponsetorisingunemployment.Finally,somerecommendationsforkeyareasthatneedpolicyattentionareproposed.2 Asthisbriefusesvarioussourcesinadditiontoofficialyouthunemploymentdata,suchastheChinaHouseholdFinanceSurveyandChinaFamilyPanelStudies,itprovideslonger-termtrends inthePRC’syouthlabormarketandoffersadeeperanalysisonthePRC’syouthemploymentchallenges. UNDERSTANDINGYOUTHLABORMARKETCHALLENGESIN THEPEOPLE’SREPUBLICOFCHINA ThePRC’syouthunemploymentratehasbeenincreasingsteadilysince2018whenofficialdatabecamepubliclyavailable.Duringthepandemic,thisrisingtrendhasbecomemorepronouncedandishighcomparedwithotherlargeeconomies(ADB2023).Thissectionexaminestheunderlyingreasonsforthishighunemploymentrateamongtheyouth,includingbothdemand-andsupply-sidefactors. A.Demand-SideFactors Weakjobcreationduetotheeconomicdownturn.WeakeconomicactivitytendstobeassociatedwithhigherunemploymentasperOkun’slaw(Okun1962).This relationshipseemstobemoresignificantforyoungworkers. Figure1:SurveyedUrbanUnemploymentRate %25.0 20.0 15.0 10.0 5.0 0.0 Jan-18Jul-18Jan-19Jul-19Jan-20Jul-20Jan-21Jul-21Jan-22Jul-22Jan-23 Ages16–24Ages25–59 Source:NationalBureauofStatistics(accessed19May2023). 2ThisbriefisthesummaryoftheADB–PRCPolicyDialogueWebinar(DeepDiveintoPRC’sYouthEmploymentChallenges)on16December2022andthebackgroundpaperwrittenbyShuaizhangFeng,deanofSchoolofEconomicsanddeanofInstituteforEconomicandSocialResearch,JinanUniversity;andJingliangLu,InstituteforEconomicandSocialResearch,JinanUniversity.ThepanelistsoftheADB–PRCPolicyDialogueWebinarincludedMinTang,counsellor,StateCouncilofPRC;ShuangyuanW