Xie Fuzhan

Full employment, economic growth, price stability and balance of payments equilibrium are the four major goals of the governments in various countries to administer the economies. In recent years, employment pressure in China has become ever greater. It has attracted wide attention of all social circles and posed a grave challenge to and a main pressing problem for the governments at all levels.

I. Current Employment Pressure

China’s employment pressure comes mainly from four areas. First is the staff and workers laid off by urban state-owned and collective enterprises. At the end of 2002, those who were laid off by the state-owned enterprises and had not found jobs totaled 4.1 million and those who had been laid off by non-state-owned enterprises totaled 2 million. The rate of reemployment has declined in recent years, being respectively 42 percent, 36 percent and 30 percent for 1999, 2000 and 2001. Second is the employment of newly added labor. In the past five years, the gap between the economically active population and actual employment was about 15 million people annually on average. In the cities and towns alone, the registered unemployment rate at the end of 2002 was 4 percent, or about 7.1 million unemployed people. In other words, 7 million jobs need to be created each year for the newly added labor in the cities and towns. Third is the movement of surplus rural labor. Rural employment totaled about 360 million people, accounting for 50 percent of the employment population of the nation. It is estimated that at least more than 100 million surplus rural labor need to be moved to the non-agricultural industries and to cities and towns. For the newly added rural labor alone, 10 million jobs need to be created each year in the non-agricultural industries. Fourth is the demobilized servicemen and the personnel trimmed off from government agencies and institutions. Though relatively small in number, placement of these people is highly rigid and involves high cost because of their social status.

The interweaving of the pressures from the four areas means that more than 23 million jobs must be created each year in the cities and towns. In light of the current level of productivity, only about 8 million to 10 million new non-farm jobs can be provided each year, based on a growth rate of 7-8 percent. In fact, in the past five years, the average annual growth rate of 7.7 percent provided 8.35 million new jobs in the urban areas. This is far below the level required to even place the urban unemployed, let alone to provide employment for the rural surplus labor. Or we may say that absorbing rural surplus labor means more urban people will be unemployed. This is why in recent years the moving of the rural surplus labor has been slowing down, the rate of reemployment for those laid off by state-owned enterprises has been falling, and the rate of registered unemployment has been rising.

II. Difficulties in Increasing Employment

Unemployment is a universal problem in the world today. The unemployment rate in the transition economy and those in Latin America has been high all the time, and most members of the European Union have also been plagued by high unemployment rate for years. At the end of 2002, the unemployment rate in the world’s three major economic plates – the United States, the European Union and Japan – was respectively 5.8 percent, 8.3 percent and 5.4 percent. In general, the unemployment problem in most countries is of a cyclical nature, associated with a low growth or negative growth. The unemployment problem in China is quite different from that in these countries. Its unemployment rate has been rising when its growth has been high. It has its own unique causes.

1. The employment pressure arising from system changes

Since the 14th National Congress of the Communist Party of China, the policies and strategies of the country’s reform has become increasingly clearer, from the "probing" stage to the stage of establishing a basic framework for a socialist market economy. In the microeconomic sphere, the emphasis has been placed on developing the economies of diverse ownerships and on reforming the state-owned enterprises so as to remold the microeconomic foundation for the national economy. In the macroeconomic sphere, the emphasis has been placed on establishing and improving the macro-regulatory systems and market systems so that the market can play a fundamental role in resource allocation. Efforts in the two spheres have been going hand in hand and deepening step-by-step. In the past 10 years, the market-oriented reforms have brought about two major changes to the labor market. First is that a unified labor market is replacing a scattered labor market. The separation of rural employment from urban employment has been broken up, and the rural labor are no longer limited to seek employment in their native places and are beginning to move into the cities and towns for employment. This has further aggravated the imbalance between labor supply and demand in the cities and towns. Second is that elastic employment is replacing rigid employment. Lifetime employment and the "iron rice bowl" for those employed by enterprises have become something of the past. Large numbers of redundant staff and workers were laid off by state-owned and other urban enterprises and joined the ranks of the unemployed. These two changes have gradually released the employment pressure that has been accumulated and hidden under the planned economy. As a result, unregistered unemployment has turned into registered unemployment. We should say that this kind of change in the labor market is of a positive nature and is also indispensable. The key to the problem is how to keep the unemployment rate within the limit that economic development and social stability can tolerate. This kind of control is not designed to obstruct the flow of the rural labor or to stop the lay-off of the staff and workers by the state-owned enterprises. Rather, it represents an active effort to create new employment, to improve the abilities of the job hunters and to offer them opportunities for equal competition. In a short-term perspective, apparently, create job opportunities for the laid-off staff and workers in cities and towns will be a key and difficult area. With the deepening of the SOE reform and with the gradual solution of the problems left over by the old systems, the pressure associated with system changes will lessen slowly. In the medium and long terms, however, the most difficult area is to find employment for the newly added labor and the transfer of the rural surplus labor. Easing this contradiction will be a long and arduous process.

2. Accelerated process of informatization has made employment more difficult

By the end of 2002, China’s per capita GDP was still less than 1,000 U.S. dollars, about half of all the country’s labor were still in the primary industry, and urban population accounted for only 39.1 percent of the national total. Industrialization is yet to be completed. According to the general rules of traditional industrialization, the medium-term industrialization should be the period characterized by most dramatic structural changes and by most rapid transfer of labor from the primary industry to the secondary and tertiary industries. Since the mid-1980s, however, the fast information revolution has made the knowledge economy a leading force for economic development worldwide. In general, the constant increase in scientific and technological contents and the continuous rise in the level of technology, though helping expedite the process of industrialization, are not conducive to the expansion of employment.

...

If you need the full context, please leave a message on the website.