Why China’s soaring youth unemployment doesn’t signal an economic apocalypse
- After decades of high growth, today’s youth – even with fewer people working – will be wealthier than any other generation
- But policymakers must tread carefully, to ensure dissatisfaction does not boil over into unrest and cause political instability
But such miracles cannot last forever, and Chinese policymakers have anticipated the inevitable slowdown for over a decade. In 2013, economists (both in China and around the world) predicted that growth would gradually fall to 3-5 per cent by 2030, but that high-skilled sectors like tech would continue to expand.
The decline in GDP growth, however, came much sooner and was much sharper than expected, owing to policy decisions, the trade war with the US and the Covid-19 pandemic, which caused more severe and longer-lasting economic disruptions in China than in other large economies.
Besides failing to predict the timing and magnitude of China’s slowing growth, economists and policymakers misjudged who would suffer most. It was widely assumed that high-skilled jobs, especially in tech, would be protected. After all, tens of millions of blue-collar workers were laid off from unprofitable factories during China’s transformation from a low-productivity command economy to a high-productivity market-driven economy in the late 1990s and early 2000s.
Beijing’s response to jobless youth’s Kong Yiji comparisons has been tone-deaf
Traditionally, the rewards have been worth the sacrifice. In contrast to lower-ranked schools in China, a degree from a top university opened doors to the best firms and almost guaranteed low levels of employment volatility. Even as unemployment steadily increased, graduates of elite institutions could count on opportunities in tech and finance – the sectors that were supposed to fuel China’s growth. But now even this cohort is facing a tough job market.
During China’s large-scale privatisation process, older workers struggled to find new employment in the rapidly changing economy. But now, employers are reluctant to lay off older workers – they have valuable experience and are protected by labour laws. The contraction in jobs is therefore felt most acutely among young people. Recent Chinese graduates face stiff competition for positions that often pay less than before.
This is a hard pill to swallow. Many graduates applying for these jobs have been studying intensively since early childhood. Their parents, and sometimes even their grandparents, invested money in tutors, starting as early as preschool, and spent countless hours cajoling them to study more. But what was the point if the jobs they were working towards no longer exist?
That said, soaring youth unemployment does not spell economic apocalypse for China. After decades of high economic growth, today’s youth – even with fewer people working – will be wealthier than any other generation in China’s history. The problem that youth unemployment poses for China comes down to one question: how will the mismatch between expectations and reality manifest itself?