A Dearth of Work for China's College Grads

The job hunt came as a shock. The 23-year-old job seeker graduated in June from a good school—Beijing University of Technology—with a bachelor's degree in materials science, a subject he figured would appeal to employers. Yet he had to go through scores of interviews and comb the online job sites endlessly before landing a job at a local trading company. Happy ending? Barely. The pay, $368 a month, is meager by Beijing standards, so he has had to move back in with his parents and he's too ashamed about the outcome of his job search to give his name. As the young man explains, there are too many recent grads looking for jobs, while companies want only the most qualified people at the lowest price.

At least he got a job—many of his peers are still looking. Even as labor shortages plague manufacturing industries, more than one-quarter of this year's 6.3 million Chinese college graduates are unemployed, according to the Education Ministry.

The problem of graduate unemployment and underemployment has been building for years, due to rising university enrollments and a mismatch between what students learn and the skills companies need. About a decade ago, the government decided to boost university admissions, a move that policymakers believed would yield big economic benefits as China shifted to an economic model based more on innovation than on cheap manufacturing. Since 1998 the number of graduates has risen threefold, according to Zeng Xiangquan, dean of the School of Labor Relations and Human Resources at Renmin University of China in Beijing.

"Ant Tribes"

The expanded enrollment has slowed down salary increases for entry-level white-collar jobs. Graduates in high-cost cities such as Beijing and Shanghai struggle to get by, living in crowded dormitory-like conditions. Chinese sociologist Lian Si has coined the term "ant tribe" (yi zu in Chinese) to describe the tens of thousands of grads subsisting in squalor on the outskirts of China's biggest cities. In an Aug. 6 commentary for China Daily, Yu Jianrong, a scholar at the Chinese Academy of Social Sciences in Beijing, wrote that with so many college grads marginalized, China risks creating a new class of "underdogs" who seethe with "hatred against the bureaucracy."

Foreign companies are not doing much to absorb this surplus labor. Those that take on newly minted grads typically find they "have to invest significantly in training and development to bring their new hires up to par with their peers in other countries," says a white paper published in May by the American Chamber of Commerce. "While we hire many recent graduates, of course we prefer candidates to have working experience, especially in a multinational, diverse environment," says Trevor Hale, director of corporate communications for Ford Motor, Asia Pacific & Africa. "In some disciplines like engineering or marketing, we would much rather have fewer people who are more senior and experienced than a greater number of less experienced people." According to Gerard A. Postiglione, a researcher on Chinese education at the University of Hong Kong, Chinese college students are not trained to work collaboratively, be creative and innovative, or take risks.

Some of these deficiencies are a product of the Communist Party's decision to model the educational system on that of the Soviet Union. After the new regime seized power in 1949, China's comprehensive universities were replaced with Soviet-style schools that churned out graduates narrowly focused on skills seen as necessary to manage a heavy-industrialized, planned economy. Academia was dealt another blow by the Cultural Revolution of 1966-76, when the Red Guards shut down all institutions of higher education and persecuted thousands of teachers and administrators.

Education Reform Plan

One feature that has survived all the upheaval is the traditional emphasis on rote memorization. "The teacher stands and talks, talks, and talks. The students sit and listen, listen, and listen," says Renmin's Zeng. "We overemphasize theory and don't [do well] when it comes to the teaching of practical skills." Compounding the problem is that state-owned enterprises, which traditionally hired many college grads, have been severely downsized themselves.

The government is trying to set things right. Chinese authorities on July 29 announced a "National Plan for Medium and Long-Term Education Reform and Development" that will boost spending on education at all levels and focus university curricula more on practical skills. Outside analysts are encouraged. "The blueprint 10-year plan is very clear about the flaws in the educational system," says University of Hong Kong's Postiglione. The city of Chongqing, meanwhile, has introduced special funds and tax rebates to support graduates who set up their own businesses. The central government is urging young people with college degrees to apply for official posts in the poor interior provinces.

Already, the government is claiming a small victory of sorts, with the Education Ministry announcing recently that the rate of employment for recent graduates rose from 68 percent in 2009 to 72.2 percent this year. "As the economic structure changes, more suitable jobs for graduates will be created," says Zhang Juwei, deputy director at the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences. Although Zhang may be right, that scenario is little comfort to the more than 25 percent of recent grads still hunting for work.

The bottom line: China's new university graduates lack the skills companies need, and there are too many of them, which is keeping salaries low.

    Before it's here, it's on the Bloomberg Terminal.