For years the world stood in awe at the number of science and engineering degrees earned at Chinese universities. Now it seems China cannot find meaningful work for these graduates.
Youth unemployment has gone off the charts. Matters are so severe that it threatens the economy’s growth potential, even the social contract between the Chinese Communist Party (CCP) and the Chinese people–to deliver prosperity in return for the party’s ruling monopoly.
The situation has reached extremes. In April, the latest month for which data are available, the urban unemployment rate for people between the ages of 16 and 24 rose above 20 percent, exceeding the former high of 19.9 percent in 2022 during the worst of the pandemic lockdowns. The youth unemployment rate now stands at almost four times the nation’s overall unemployment rate of 5.2 percent. And this ugly reading fails to account for the millions set to graduate from universities and high schools this spring. The measured unemployment rate also understates the pain in another way as well.
According to a recent paper by professor Xiaogang Li of Xi’an Jiaotong University, millions more, fully one-quarter of recent university graduates, work in positions that do not require their degree. He refers to these unfortunates as “underemployed.”
China’s problem is almost entirely self-inflicted or rather inflicted on China by the planners in Beijing. This sort of self-inflicted pain is often the case in centrally planned economies and almost as often the case in market economies when a central authority insists on imposing its latest bright idea.
Like the United States, though not in imitation of it, Beijing decided years ago that it needed more college-educated people to create a modern, technologically advanced economy. Unlike the United States, though America seems to be moving in Beijing’s direction, the authorities in China stressed science and engineering. Now China has a large class of educated people who cannot find a place for their skills and credentials in the economy.
Testifying further to the planners’ errors, Beijing now predicts that at the same time as the economy faces a surplus of the college-educated, it faces a shortage of manufacturing workers. By 2025, Beijing’s planners admit, some 30 million manufacturing jobs, nearly half the number needed by the sector, will go unfilled.
Beijing is well aware of the dangers implicit in a situation. Apart from the serious need for manufacturing workers, it faces a surplus of well-educated and very frustrated people who may feel betrayed by the authorities. Beijing has responded with more plans. China’s State Council announced in April a 15-point scheme. Among its elements is a major effort at training, or perhaps better stated, “retraining” the unemployed graduates and expanding state support for what Beijing calls the “entrepreneurial ambitions of college graduates.” In the immediate emergency, the State Council’s plan has further pledged to expand hiring by state-owned enterprises.
Had Beijing done more to fulfill another of its ambitions, it might face a less severe problem than it does now. CCP leader Xi Jinping has often cited Beijing’s desire to move China from its current emphasis on low- and mid-skilled manufacturing toward a more advanced, service-oriented economy. But that ambition was always more rhetorical than real.
Indeed, the development of a service economy always conflicted with Xi’s emphasis on gaining global dominance in certain manufacturing and mining operations. His mining and manufacturing ambitions had directed investment spending at state-owned enterprises and denied credit to consumer-oriented, small- and medium-sized businesses that might naturally have moved in the direction of a service-based economy.
China is not alone in this. Much of the developed world emphasizes university and has an excess of graduates who cannot find work consistent with their credentials. But China—the quintessential planned economy—has put itself in a more severe situation than most other nations.
Had Beijing not built up a massive university system and funneled millions through it, the nation today might have more workers willing to do needed manufacturing jobs. Had Beijing not starved small- and medium-sized businesses for credit to massively pursue its endeavors through politically favored but inflexible state-owned enterprises, it might now have the service economy to which Beijing only ever paid lip service. But that is not what happened, and now Beijing faces a serious and self-inflicted problem of youth unemployment. It has also offered the world an object lesson in the unintended consequences and implicit dangers of authoritative central planning.
