Discouraged by the State of the Labor Market, China’s Gen Z Is Putting the Country’s Economy at Risk
While Gen Z was supposed to take the country to the top, it is now a liability to the economy.
Generation Z, supposedly the most educated generation in China's history, was expected to lead the country to its peak. It was heralded as the generation that would lead the way to a more innovative and technologically advanced economy. Yet today, some 15 million young people are unemployed and have their ambitions scaled back, jeopardizing the future of the entire country.
The Middle Kingdom is in turmoil. In addition to inflation, the country is facing a record level of unemployment among 16 to 24-year-olds (19.3%). A figure that could increase in the coming months, with the arrival of about 12 million young graduates on the labor market where the available jobs are far from matching the expectations of young graduates.
The problem is not only that the number of unemployed is increasing, but rather that young workers, discouraged in their search for opportunities in innovative sectors, opt for “safe” jobs.
The consequences of Xi Jinping's zero-COVID strategy continue to weigh heavily in China
The fact is that the strategy adopted by the Chinese government to combat the upsurge of coronavirus cases in recent months has caused a wave of layoffs in the private sector. Closed down, companies could not keep their employees. And although today the pressure is (slightly) less, companies are not immune to a new wave of confinements. Confidence is no longer there, which has led to a certain weariness on the part of companies, but also of young job seekers. Discouraged, the latter ones are now ready to give up their ambition and turn to the public sector, even if it means accepting lower wages.
Unlike private companies, the public sector is hiring despite a slowing economy, due to a decision by Beijing. The Chinese government has forced state-owned enterprises to hire in response to the difficulties encountered by the labor market.
If unemployment rises and innovative sectors continue to be neglected, growth in the world's second-largest economy could be jeopardized. The outlook for 2022 has already been downgraded due to the recent wave of coronavirus and the subsequent lockdowns. Too many unemployed people, especially those under 25, and a lack of innovation are hurting the gross domestic product.
With job seekers disillusioned, China's economy faces increasing peril
Why would taking a position in the public sector be a bad thing, since it necessarily reduces the number of unemployed in the country? The fact is that by opting for a position in a state-owned enterprise, young graduates are leaving new sectors behind, which jeopardizes innovation and therefore, the country's economy.
“The structural adjustment facing the Chinese economy right now requires more people to become entrepreneurs and struggle,” said Zeng Xiangquan, director of the China Employment Research Institute in Beijing, Bloomberg reports. Lowered expectations have “hurt the utilization of the young workforce. This is not a good thing for the economy.”
Now, young workers are no longer racing to find their dream job, but prefer to opt for a position that offers the bare minimum to get by, with a better work-life balance.
A turnaround coming for public companies?
As China's economy exploded, private enterprises became increasingly important, especially in terms of employment share. For example, while state-owned enterprises still accounted for 40% of employment in 1996, this share dropped to less than 10% before the pandemic. But this trend could be reversed in the coming years.
China has embarked on a particularly strong regulatory crackdown on prolific sectors, including technology, real estate, and private tuition. These sectors are dominated by private companies that used to attract young and ambitious profiles.
State-owned enterprises are not necessarily outdated compared to private enterprises, but economic evidence suggests that they are often less efficient and less innovative.
Unfortunately, despite Beijing's policy on public sector hiring and its desire to regain control, private enterprises will not be enough to significantly reduce the number of unemployed. “We still need private companies to hire,” said Lu Feng, a labor economist at Peking University. The Middle Kingdom needs private companies.
But for them to hire again, the economy must be growing and the outlook optimistic, which is not the case. Private companies are wary because of the uncertainties regarding the spread of the coronavirus in the country and the Chinese government's particularly strict policy on this subject. This is why hiring is rare.
However, beyond the issue of the coronavirus, the Chinese government's policies may pay off in the long run. In the meantime, China could face difficult days with a possible recession in the coming months.
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