Although China has seen massive growth in the economy over the last decade and it is usually thought that economic growth and job creation go hand in hand, it is not always the case, and it is not the case in China. This is because economic growth is bettered with increasing labour productivity and as labour productivity rises (Wolf,) the rise in employment that comes with GDP growth is lowered, thus causing less employment in the economy. This has happened in China. While China has 1.3 billion people which means that they have a huge supple of low cost labour which attract foreign companies to produce there, the rising trend of globalization has meant that this labour has to work well with technology, management, design, marketing and capital. This has meant that the productivity of each unit of labour has been rising continuously and has slowed the rate at which jobs are created in the country. So, to generate the same number of jobs, more growth in the economy is needed now that productivity from each job position is higher. While China had the higher growth rate between the large economies in the world of 7.8% on average from 1998 to 2002, the increase in employment was only 1% per year (Wolf.) Official figures show that urban unemployment in this period rose from 3% to 4% or 10million from 6.7 million while urban employment has actually grown from 224 million to 248 million, which means that there were 10 million more workers seeking jobs than new jobs created. Unofficially, the RAND Corporation has released figures which include "disguised" rural unemployment and "unregistered" urban unemployment which show that the unemployment rate in China is actually closer to 23% (Wolf.) The growth in the economy is also slowing in China with last year's growth of 7.8% being the lowest in 13 years, which will further affect this unemployment problem in the country (Financial Times.)
Unemployment has several negative consequences for the population in the country. Economically, the negative multiplier effect that comes from unemployment exacerbates the economic problems (Riley.) As unemployment rises, the unemployed spend less, which means there is less demand in the economy and more are unemployed and even lesser spending, a spiral downwards. These deflationary forces on prices, profits and output will have a negative effect on the national product and in extreme cases, the "hysteresis effect" may mean that some unemployed will permanently remove themselves from the job market causing detrimental long term effects (Riley.) The government also loses out on tax revenues it cannot collect from the unemployed and will be spending more on welfare. The budget deficit will increase which may result in lower spending on the part of the government leading to greater deflation and unemployment. On a smaller level, the unemployed face great hardship, the loss in income means that the unemployed see a decline in living standards and social costs for the entire population will rise in the form of crime, social dislocation, health effects, access to services etc. These social effects are going to be examined in this paper.
The rise in unemployment in China has brought with it great social deprivation. Historically, the socialist system in China has meant that almost everyone was employed in some capacity but the rise in globalization has meant that the Chinese economic reforms have led to government policies that support a more competitive labor market (Price & Fang.) Before 1980, urban workers in China were protected by the 'iron rice bowl" which meant that they were assigned jobs that were guaranteed for life in state run enterprises. These enterprises also ensured housing, health insurance, pensions, childcare and sometimes, education for the children. When the economy went through reforms, all of these benefits were lost with enterprises being put on strict budgets which led to mass unemployment for these people who were not prepared for such an event and did not have the skills to deal with it (Price & Fang.) Things are very different now, and there is a huge number of unemployed both in rural areas and among urban graduates (The Globe and Mail) which means that they no longer have access to this universal housing, healthcare and education that they may have had before China made efforts to make its economy more competitive.
The social costs of unemployment are great. On a personal level, the longer an individual remains unemployed, the lower are the chances of an employer hiring them (World Issues.) This has meant that graduates in China have had to take menial jobs like construction work to survive and keep working (The Globe and Mail.) Out of the 2.12 million students that graduated in 2003 from higher education institutions, 640,000 had not been able to secure full time employment by the time they had graduated. Many are having to take only double the minimum wage at 1,200 yuan monthly while having to pay dearly for fixed costs like unemployment insurance, health insurance and superannuation (Brown.) By this measure, taking into account that the cost of living in cities like Shanghai, this pay barely covers the expenses they will incur. The government is, therefore, planning to encourage these college graduates to work in the central-western regions or start their own enterprises (First Post.) Graduates can join the "three supports and one assistance" program that is designed to encourage graduates to go work in rural areas and support development in agriculture, healthcare and education (China Labour Bulletin.) They receive subsidies from the government who also assists them in finding jobs in the rural areas. Some of these problems may also come from the expectations that the college students have for themselves as they may be unwilling to take jobs that they may consider beneath them but are the only ones available in the economy. Human resource managers are finding college graduates unsuited to the market as they believe that they have unrealistic expectations about salaries, working conditions and career development with employers finding them unwilling to compromise and overconfident in their skills (China Labour Bulletin.) The salaries of the graduates that are employed are also low with the average monthly salary in 2012 being 3,048 yuan which is an increase of only 282 yuan from 2011. This meant that the monthly incomes of new graduates are on the same level as uneducated and unskilled migrant worker with a middle school education with 69% of new graduates earning less than 2,000 yuan per month (China Labour Bulletin.)
There is also a great amount of unemployment for the rural migrant population. After the easing of freedoms as part of a push towards globalizations, there has been greater geographical mobility in China (Tan.) This has meant that there has been a great influx of rural migrant workers to the urban areas in search of better opportunities for employment. For example, in Shenzhen, in 1994, about 50% of the total labour force in city was from these rural areas, this lead to social problems between the local population and the newly arriving peasants from the countryside as the locals complained of lower job prospects for them due to the arriving workers. However, about 90% of these new workers were employed sweeping the streets, a job that was required to keep the relatively higher standards of living in the city. With this access to cheap labour, social problems also arose, like increased rates of crime, vagrancy and other social ills (Tan) as these young and middle aged farmers struggled to adapt to living in the cities.
In 1994, Beijing had 2 million migrants working there in addition to the 9 million permanent residents and a 1993 survey of crime in the city said that 80% of criminal offenses were carried out by the migrant population. 80% of the people arrested in the southern Pearl River Delta and other coastal regions were also outsiders (Tan.) The lower standards of jobs and the costs of living these migrants face in the large cities are partly responsible for this prevalence of criminal activity in this section of population. With unemployment rising, these problems are set to become more severe. These workers also have a detrimental effect on other social issues like security, hygiene and family planning (Tan.) Good job prospects are hard to come by for these migrant workers as they lack the necessary industrial skills and have a poor educational background meaning they cannot apply for positions that need more developed skills (Tan.) These farmers, therefore, face unemployment in the urban areas as well and end up in terrible living conditions are more susceptible to social ills. The government has suggested that it plans to offer free training and education to these farmers so that they are able to adapt to the job market that requires higher skill levels (First Post.) However, with the huge number of graduates that are skilled and cannot find jobs, it is unlikely that such measures will yield any real results.
There is also a real problem of corruption in the country that affects the unemployed and makes it even harder for them to survive. According to the 2013 Index of Economic Freedom, China has widespread corruption and its economy remains "mostly unfree." They conclude that the legal and regulatory systems are susceptible to influence from political forces and directives from the Communist Party which means that the rule of law and respect for contracts are ultimately undermined by the power wielded by the Communist Party's overruling authority. There is also cronyism that is prevalent in the institutions and leaders often overlook measures that can increase efficiency and long term benefits which has meant that economic reform that can grant true liberal ideals to the workings of the institutions is not being forwarded at the right rate. The judicial system is also very weak and all land is state owned with firms and individuals owning and transferring long term leases that come with many restrictions. There is no protection of intellectual property and copyrights, patents and trademarks are violated routinely with corruption having a strong hold on banking, finance, government procurement and construction (Heritage Foundation, 2013 Index of Economic Freedom.) In an environment like this, cronyism and nepotism is prized over merit and employment is hard to come by even for the most gifted of graduates if they do not have the right connections or are averse to bribery or unable to bribe. Since the regulatory bodies are also very inefficient, the option of starting their own businesses may also be very hard to take as it is very difficult to do so. The framework for these procedures are complex, arbitrary, uneven and rife with corruption (Heritage Foundation, 2013 Index of Economic Freedom,) with licensing costing three times the average annual income. Even if they succeed in forming their own businesses, the sate imposes massive price control across the board that impact things from energy to raw materials and other basic goods (Heritage Foundation, 2013 Index of Economic Freedom.) The premier Li Kequiang, seems to be aware of these problems and has made promises of reducing red tape for entrepreneurs looking to start their own businesses with official sources pointing that 80% of the employment in is small and medium sized businesses in the country (Financial Times.)
Social mobility is also a great problem in China (The Atlantic,) and is compounded by the corruption, cronyism and nepotism inherent in the country. For example, a bank in China had 15 opening for graduates for a position which is well regarded not only for its financial advantages but for its social respectability and stability but most positions would go to people who have previous connections to high ranking employees at the bank (The Atlantic.) Of the 60 interns it would employ, only about 2 or 3 would go on to a permanent position at the bank with the other positions being filled by students with better family backgrounds and connections, and thus even the students with the highest grades and best performances would be laid aside for the more well connected ones (The Atlantic.) According to an internship director who has seen many hard working students from rural areas being put aside for more connected individuals, young people's chances at moving up in society through jobs at these institutions are severely limited by the corruption in the system. He even goes as far as to advice " know your capabilities and limitations, listen to your parents (if they are successful), don't try reach for the stars if you are starting from a low point, and don't forget to marry wisely," which shows the hopelessness that pervades the thinking of the graduates from less socially established families (The Atlantic.) This is a huge problem for the rural migrants who are educated in the cities and seek to take the opportunities available in the urban areas.
With these economical and social factors complicating the lives of the unemployed, it seems that these problems will only get worse if measures are not taken to create more jobs and educate and train the workforce to better handle the requirements of the workplace. Expectations also need to be managed so that new graduates know what to expect when they enter the job market. Corruption plays a huge role in further depressing the chances of gainful employment in the country and efforts should be made to stamp it out and reward merit over cronyism and nepotism. The government also needs to ensure that the employees have access to social benefits when they are working.
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