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

ADB BRIEFSNO. 247JUNE 2023ISBN 978-92-9270-183-3 (print)ISBN 978-92-9270-184-0 (electronic)ISSN 2071-7202 (print)ISSN 2218-2675 (electronic)Publication Stock No. BRF230205-2DOI: http://dx.doi.org/10.22617/BRF230205-2A Closer Look at Causes of Youth Unemployment in the People’s Republic of ChinaKEY POINTS• The labor market of the People’s Republic of China was hard-hit by the COVID-19 pandemic, and this particularly affected young people. • Demand- and supply-side factors contributed to a higher youth unemployment rate that has been aggravated by mismatches between the skills provided by college education and those employers need. • In the short term, it is important to stimulate economic growth and to promote services and the private sector to help create jobs for young people. Meanwhile, policy support can be increased for low-skilled migrant youth and college students from low-income families. • In the long term, the government can continue to improve the skills of the labor force.INTRODUCTION The People’s Republic of China (PRC), the country with the world’s largest labor force (792 million in 2021), faces significant demographic challenges—notably an aging population, a shrinking labor force, and a declining young population. The share of young people is projected to decline in the next decades, and they will stay longer in education before entering the workforce. The gross enrollment rate in tertiary education almost doubled to 58% in 2021, with a 28 percentage point increase from 2012.At the same time, young workers are increasingly likely to be employed in service industries, working for private enterprises, and holding gig jobs,1 while the share of youth employment in manufacturing has decreased steadily over time. Note: ADB recognizes “China” as the People’s Republic of China.1 The gig economy “comprises three key components: independent workers paid by the ‘gig’ (an individual task or project), consumers who need a specific service, and companies that connect the worker to the consumer in a direct manner, including through app-based technology platforms. A key feature of a gig is that it is a temporary work engagement and the worker is paid only for that specific job.” Asian Development Bank Institute (ADBI). 2022. Strengthening Active Labor Marker Policies to Drive an Inclusive Recovery in Asia. https://www.adb.org/publications/strengthening-active-labor-market-policies-to-drive-an-inclusive-recovery-in-asia.Shuaizhang FengInstitute for Economic and Social ResearchJinan UniversityAkiko Terada-HagiwaraPrincipal Country SpecialistPeople’s Republic of China Resident Mission (PRCM)Asian Development Bank (ADB)Jingliang LuInstitute for Economic and Social ResearchJinan UniversityWen QiAssociate Economics OfficerPRCMADB ADB BRIEFS NO. 2472These developments made young workers more vulnerable to the impact of the coronavirus disease (COVID-19) as employment is more volatile and procyclical in the private sector compared to the state sector (Feng and Guo 2021), and the consuming service industries are more prone to major anti-COVID lockdown measures.The COVID-19 crisis and related mobility restrictions have severely impacted the PRC’s labor market, particularly for the youth. While the unemployment rate for prime-age workers (25–59 years) improved swiftly and fell nearly to its prepandemic level by the end of 2022 after peaking at 5.6% in February 2020, the recovery of youth employment has lagged behind (Figure 1). The surveyed unemployment rate for workers aged 16–24 years averaged 17.6% in 2022, up from 11.9% in 2019 before the pandemic. The structure of this brief is as follows. This brief first analyzes the driving factors that contributed to the PRC’s rising unemployment rate for urban youths, including college graduates and rural-to-urban migrants, prior to the pandemic, as well as the impacts during the pandemic. It then summarizes current government policies in response to rising unemployment. Finally, some recommendations for key areas that need policy attention are proposed.22 This brief is the summary of the ADB–PRC Policy Dialogue Webinar (Deep Dive into PRC’s Youth Employment Challenges) on 16 December 2022 and the background paper written by Shuaizhang Feng, dean of School of Economics and dean of Institute for Economic and Social Research, Jinan University; and Jingliang Lu, Institute for Economic and Social Research, Jinan University. The panelists of the ADB–PRC Policy Dialogue Webinar included Min Tang, counsellor, State Council of PRC; Shuangyuan Wen, director of Employment Department, the Student Services and Development Center, Ministry of Education; Haizheng Li, professor at Georgia Institute of Technology; Zhilei Tian, assistant professor at the China Institute for Educational Finance Research, Peking University; and Boqing Wang, president of MyCOS Data.As this brief uses various sources in addition to official youth unemployment data, such as the China Hou