Why is China's youth facing massive unemployment despite the nation being the second largest economy?

The world’s second largest economy, China, is grappling with rising unemployment, with the youth in the country struggling to find work.

According to a Reuters report, 3 million students sat for the annual civil services exam on November 27, for 39,600 vacancies. On an average, 77 people are contesting for one seat. And this trend was seen last year too, when 2.6 million people sat for the 37,100 vacancies in the civil services exam.

What

• Since the pandemic, China’s economy has struggled to come back to terms. The youth unemployment has risen to 21% as of May 2023, up from 15.4% two years ago.
• In China, the trend has always been to drift towards private sector jobs, which pays high, over government jobs, where the payments are quite less.
• However, the youth are now settling for government jobs, seeing the job scarcity in the market.

“Companies are laying off employees and closing down in large numbers. It is not stable at all, so I have to choose to be a civil servant. Less earnings is fine. At least, I won’t be unemployed and starved to death,” Reuters quoted a Chinese youth as saying.

What is the problem?

• The unemployment issue arose right after the pandemic, when the lockdowns shut off several companies, and employees lost their jobs.
• However, while rest of the world picked up pace in the last two years, China’s unemployment issues went from bad to worse.
• According to a Goldman Sacchs report, the problem also lies in the skills the youth have or are developing in China, which does not conform with what the industry demands from them.
• The report said that though the overall unemployment rate in China is increasing, the joblessness among the 16- to 24-year-olds is increasing.
• In April, it increased to 20.04%, nearly double the age group’s pre-pandemic level of about 10% in April 2019.
• Economist Maggie Wei in her report noted that young people are more vulnerable to economic downturns, most likely because they have less work experience.
• That vulnerability was amplified by the pandemic, when the service sector stopped hiring and was instead laying off employees.
• She noted that the unemployment trend among China's youth might increase in the next few months, as the strong supply of workers in the job market in the graduation season might put more stress on the economy.

Mismatched skillsets

• The report also highlights that the skills needed for the jobs, and the skills being learnt and possessed by the youth are also severely mismatched, which might contribute to the growing unemployment.
• “The stakes are high for correcting these imbalances, given how important the youth population is to China’s economy,” the report said.
• It noted that the skilset mismatch would only be dealt with gradually. “Addressing the misalignment between school disciplines and business would help, but this is a difficult and medium term task and unlikely to yield significant improvement in the short run,” the report said.
• However, the Chinese government is taking note of this, and is also promoting employment for college graduates. 
• Recent recruitments in Chinese military favoured college students. Moreover, country’s state-owned enterprises have also vowed to create 1 million internship positions for graduates in the next two years.