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A New Shortage in China's Coronavirus-Hit Economy: Jobs for Biggest Graduating Class in Years

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03/30/2020 | 09:13am EDT

By Stu Woo

BEIJING -- The coronavirus pandemic is making a hard situation worse for China's growing number of job-seeking college graduates, intensifying pressure on Communist Party officials who see steady employment as critical to maintaining economic and social order.

The nearly nine million students expected to get their diplomas this year -- China's biggest graduating class in roughly a decade -- will enter one of the toughest job markets in recent history. Even before the pandemic, the slowing economy was already throwing up fewer jobs for the swelling ranks of white-collar workers.

Jin Shu, a 22-year-old student in Beijing, accepted a teaching-assistant job at a local tutoring school in January, only to have it put on ice last month after the academy shut down. The pandemic, Ms. Jin said, "is like a cloud of smog and we have no idea what the road ahead looks like."

The impact of the coronavirus, and the vast lockdowns and production suspensions that have been put in place to contain it, drove the country's urban unemployment rate to a record high of 6.2% in February -- far above the official 5% rate that has held roughly constant over the years, despite the economy's ups and downs.

Iris Pang, chief economist at ING Bank NV in Hong Kong, said the unemployment could rise to as high as 10% by the end of the year but local governments are likely to step in with stimulus to keep it from getting worse than that.

"They don't want the number to look too bad," she said.

China's government has been pushing to get businesses back up and running, but economic activity in China isn't likely to begin to normalize until late April, according to Gao Shanwen, chief economist at Essence Securities. Some analysts predict China's gross-domestic-product growth could slip to as low as 1.5% for the year, which would make it hard to generate new jobs.

With hundreds of thousands of new college graduates poised to join the ranks of the unemployed, Chinese officials are trying to find alternatives. They have expanded military enrollment and are encouraging those graduating to seek master's degrees to delay their entry into the job market.

The concern has reached the highest levels of government. Premier Li Keqiang, China's No. 2 official behind President Xi Jinping, said this month that officials in charge of economic recovery should prioritize employment over the cherished goal of increasing GDP. "As long as employment is stable this year, it's not that big of a deal whether the economic growth rate is a bit higher or lower," Mr. Li said.

Chinese leaders have monitored youth unemployment as a potential trigger for political unrest ever since high inflation and disappointing job prospects helped fuel the student-led Tiananmen Square protests in Beijing in 1989, according to Victor Shih, a University of California, San Diego, professor of political economy who focuses on Chinese policies.

"After 1989, the employment of young people became very important as a metric for stability," Mr. Shih said.

That focus intensified after unemployed young people in the Middle East became the driving force behind the Arab Spring uprisings that toppled several governments, and spooked Chinese leaders, in 2011.

Last year nearly 20% of recent college graduates struggled to find work, according to a biennial survey by Peking University's Institute of Economics of Education. This summer's graduating class, of 8.7 million students, is 5% larger than 2019's and more than double the number of graduates the U.S. expects this year.

China's employment woes date to a college-enrollment boom beginning in the late 1990s, when the government encouraged people to go to university to create a better-educated workforce. For a decade and a half, a skyrocketing economy provided enough jobs to satisfy each year's crop of graduates. Since then, demand for white-collar jobs has consistently outstripped supply, a gap that has widened in recent years as economic growth slowed.

Public-health crises exacerbate the problem. During the outbreak of severe acute respiratory syndrome, or SARS, that began in November 2002, 35% of college graduates had yet to find a job by the following June, according to the Peking University survey.

The coronavirus pandemic arrived in the middle of the spring recruitment season, when many of China's biggest companies extend job offers to graduates. A report by Peking University's Guanghua School of Management and Chinese job website operator Zhaopin Ltd. on March 25 showed new job openings in China fell by around a third year-over-year in January and February.

To keep a frustrated crop of unemployed graduates from forming, the Ministry of Education has ordered Chinese universities to expand master's degree programs by a collective 189,000 slots. It is also asking the universities to enroll more junior-college students into full bachelor's degree programs.

The expanded master's degree admissions are for the coming fall semester, when authorities hope most universities will have reopened. Even if they have to take courses online, the new graduate students will be held out of the job market.

The education ministry also encouraged students earlier this month to enroll in the military, which would make them eligible for tuition deductions. Others could find work at international organizations like the United Nations, it suggested.

Hubei, the province hardest hit by the coronavirus, said late last week that it would increase recruitment for civil-service positions by 20% and hire an additional 50,000 recent graduates for other public jobs.

The unemployment pressures highlight the Communist Party's push in recent years to expand the state sector at the expense of the private sector, a drive that has only grown with the party's reliance on state-owned firms to help supply the coronavirus response.

Beijing has ordered state firms to expand hiring of fresh graduates for two years in a row and provide internship opportunities for college students.

Small and medium-size enterprises, most of them privately owned, account for roughly 80% of all jobs in China and could provide a boost to employment, but they have been starved for financing by state-owned banks. China's finance ministry has offered subsidies and tax-breaks to smaller companies that hire more graduates or refrain from laying off employees during the coronavirus epidemic. Economists are skeptical that those enticements can compensate for the shortfalls such firms have suffered.

Encouraging more master's degrees and other short-term fixes does little to address the structural issues that are undermining the economy as manufacturing jobs move to lower-wage countries, said Liu Xuezhi, a Shanghai-based economist at Bank of Communications.

"These graduates still need to re-enter the labor market within two or three years, so we need to fundamentally solve these problems," Mr. Liu said.

Longer term, authorities are considering a series of "new infrastructure" projects, a sort of New Deal that focuses on advanced technologies such as developing 5G cellular networks and data centers, the country's state planning agency said this month.

--Josh Chin, Raffaele Huang and Bingyan Wang contributed to this article.

Write to Stu Woo at Stu.Woo@wsj.com

 

Corrections & Amplifications

This item was corrected on April 1, 2020 to reflect that China's urban unemployment rate rose to a record 6.2% in February. The original version incorrectly called it the urban employment rate in the fourth paragraph.

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