It's one of the strangest paradoxes of modern China: a booming economy and an
emerging scarcity of labour in key industries, even as millions of ordinary
Chinese suffer from a sharp rise in unemployment.
Those two contradictory trends could jeopardize China's economic miracle if
they are neglected by the Communist government, a new report by the
International Labour Organization warned Monday.
With the outside world still in awe of its economic growth, China's poor
record in job creation has gone relatively unnoticed. But the ILO report is
calling on China to focus on creating more jobs and better jobs for the flood of
new entrants to its labour force, who number more than four million annually.
From 2000 to 2004, China's economy grew by a stunning 51 per cent. Yet in the
same period, there was only a modest 5-per-cent rise in the number of jobs, the
ILO report noted. And the official unemployment rate increased to 4.2 per cent,
compared with 3.1 per cent in 2000 and just 2.5 per cent in 1990.
"China has seen a tremendous slowdown in the number of jobs being created,
compared to GDP growth," the report said.
"Given the steady increase in unemployment, job creation needs to be placed
at the forefront of the policy debate.”
Some Chinese experts have gone far beyond the ILO in their warnings of future
unemployment problems. Government researchers have estimated that the true
unemployment rate in Chinese cities is around 7 to 8 per cent because many of
the jobless are not officially registered.
With an estimated 150 million surplus workers still on the farms and villages
of the Chinese countryside, analysts have suggested that China needs to create
25 million new jobs a year to absorb rural migrants and school graduates over
the next several years.
According to the ILO report, China's mediocre rate of job creation is a
result of two main factors: the shedding of jobs at poorly performing
state-owned enterprises, which have eliminated 30 million jobs in recent years;
and the long-term structural shift from employment-intensive growth to
capital-intensive growth as the country modernizes.
Labour productivity has surged by 40 per cent in the past five years, the ILO
report said. "Yet the growing number and share of unemployed in the country
underscores the need for greater efforts toward achieving the goal of decent and
productive job creation," it said.
"Expanding access to decent work will go a long way toward spreading the
benefits of the country's tremendous growth across the country's massive
population."
At the same time, the rising unemployment rate is co-existing uneasily with a
rising shortage of labour and soaring labour costs in many sectors of the
economy.
There is an estimated shortfall of two million workers, for example, in the
southern province of Guangdong, one of the primary centres of manufacturing in
China.
Nationally, there is a shortage of about 750,000 trained managers, according
to recent studies. And in industries such as construction and machine building
in the booming coastal provinces, employers are willing to offer wages of 1,000
yuan (about $139) a month to their workers, a sharp rise from 600 yuan a month
just three years ago.
The ILO is urging China to bolster its education and training systems to
reduce the scarcity of skilled workers and technicians. "While shortages of
cheap labour threaten the dominance of China's powerhouse manufacturing
industries, the lack of qualified graduates could derail longer-term plans for a
transition to producing higher-value goods and services," the report said. "This
talent crunch is now hurting both multinational companies and local
firms."
