Will the Unemployed in China Run Out of Control?

Transcription

1 Will the Unemployed in China Run Out of Control? ZHAO Litao and HUANG Yanjie* In 2009, unemployment has become a top concern for the Chinese government with nearly 20 million migrant workers losing jobs and more than six million college graduates waiting for employment, thus posing potential threats to social order and political stability. However, analysis shows it is unlikely that migrant workers and college students will resort to full-scale collective actions. Meanwhile, the government is also trying to pre-empt potential crisis by creating more jobs and reaching out to disgruntled social groups. CHINESE LEADERS FORESEE 2009 as the toughest year since the turn of the century. They are concerned that the domestic economic downturn will threaten social stability and push the number of social protests to a new level unseen in the reform period. Like other economies hard hit by the global financial crisis, unemployment is a top concern in China. Rural migrant workers and university graduates are the two largest * ZHAO Litao is Research Fellow at the East Asian Institute, National University of Singapore; HUANG Yanjie is a Research Assistant at the same Institute. 32 east asian policy

2 groups at risk of unemployment. Educated unemployment has become a problem since 2003 despite double-digit economic growths until The problem worsens in 2009 as the economy continues to slide. Meanwhile, the scale of unemployment for migrant workers 40% of the total of 130 million is unprecedented, in part because there have never been so many migrant workers in Chinese history. Chinese leaders believe that serious and chronic unemployment can trigger social instability. The same conviction is widely shared among the media, the public and the academia. Thus, the issue is not whether the number of social protests will rise, but whether it will rise to a level that the Chinese economy will suffer and the Chinese Communist Party (CCP) s rule will be undermined. Over the years there have been growing concerns that social protests are spilling over to become political challenges. Up until 2009, strong empirical support for this thesis was lacking. Although China had experienced difficult moments many times in the past three decades during its economic development, social protests were largely localised and short-lived, except for the 1989 Tiananmen incident. People are now waiting to see whether 2009 will be different. At least for now, clear signs that China s social stability is in grave danger remain elusive. The two major groups of losers in the job markets, migrant workers and college graduates, are unlikely to stage large-scale protests and other forms of destabilising collective actions in urban areas if the government can fulfill their basic material needs and retain in them the hope of a better life. While migrant workers lack organisational In the natural course of events, it is unlikely that 2009 will become another However, unexpected events and major policy blunders may provoke a social crisis... powers for collective action in cities, the better-organised college graduates are likely to adjust their expectations rather than resort to more radical means. More importantly, the current government has found ways to convince people that it is taking quick and adequate actions to tackle the problem of unemployment and economic downturn. In a newly released policy directive from the State Department, governments at all levels are asked to focus on preserving and creating jobs in the economy, via generous fiscal packages and other policy measures to promote all forms of employment. Both migrant workers and college graduates receive special attention in policy formulation. Judging from the above factors, the CCP is therefore in a very different situation from that of 20 years ago. In the natural course of events, it is unlikely that 2009 will become another However, unexpected events and major policy blunders may provoke a social crisis with politically destabilising implications. It is essential that the government address the underlying social and economic problems of the day to soothe tensions and pre-empt future crisis. east asian policy 33

3 The Rise of Massive Unemployment Migrant Workers. The global financial crisis has hit China s labour-intensive export sectors hard. Over the last three months, trade experienced sharp contraction on a yearly comparative basis. The direct result of this sharp fall was substantial job losses in the export-related sector, employing mostly migrant workers. It is estimated that about 15.3% of the 130 million about 20 million migrant workers in coastal areas are now jobless and many more are facing the prospects of losing their jobs as the crisis deepens. Large-scale retrenchment often induces social unrest. In 2008, when the biggest toy factory in China, He Jun Toy Factory, closed down and laid off 7,000 workers, thousands of workers staged a highly publicised protest outside the factory, forcing the local government to pay their wages and make compensations. Other sporadic protests and demonstrations are frequent images in the media. Nevertheless, there were hardly any large-scale protests or other collective actions that target anything other than specific business enterprises. Since migrant workers are generally employed under short-term contracts with high turnover rates and highly differentiated in terms of their origin, age and educational background, they are not as well-organised and ideologically inspired as laid-off workers in the state-owned enterprises (SOEs) in the late 1990s, especially in comparison with PLA veterans who tend to act collectively in defence of their rights to employment. Compared with these organised groups, migrant workers lack the power base to launch destabilising collective actions on a large-scale basis in the cities. They are also unlikely to become troublemakers in the urban areas because, unlike state enterprise workers who see employment as their rights, they are most likely to move on to find another job. Nevertheless, certain elements of social instability inherent in the massive increase in unemployment in the migrant worker group remain. First, while migrant workers have weak organisations in the cities, they have very strong kinship ties in the rural area. Since most migrant workers have either rented out their allotted agricultural land or given up agriculture totally, they are bound to experience hard times making ends meet when they are back in the rural area. Common experiences and grievances may effectively move them to demand direct assistance from the government at the grassroots level, or even launch protests against county and township governments. Given the relatively weak control of the party in rural grassroots, it hardly augurs well for social stability in rural communities and townships. Another potential factor of social instability comes from the disgruntled second generation migrant workers. Second generation migrant workers spent at least some years of their childhood and adolescence in urban areas. Unlike their fathers generation, they would typically have received some education in the city. Their urban experience inculcated in their mind a modern outlook which motivates them to adapt to the urban environment and lifestyle. When their jobs become untenable, they are less willing to return to their hometowns in the rural area. They are often better educated and welladapted to modern means of communication, with stronger sense of personal rights and interests. When organised, these second generation migrant workers are more likely to be a source of effective social protests in the urban area. 34 east asian policy

4 Lastly, a large floating population without fixed and permanent work and income is a breeding ground for criminal activities. The problem is particularly acute with regard to disillusioned groups of second generation migrant workers who fail to integrate with urban life due to the lack of education and job opportunities. Today they already account for more than three quarters of all juvenile delinquencies committed by non-residents in Beijing. With increasing unemployment threatening their lawful livelihood and the lack of material and psychological support for this group of secondary citizens, it will be no surprise that major Chinese cities are likely to experience a rise in crime rate. The criminal activities committed by these underprivileged social groups will in turn stigmatise migrant workers and raise social tensions in the cities. College Graduates. Apart from migrant workers, another major victim of the worsening economic situation is China s new entrants to the labour market. A large part of new entrants into the workforce is college graduates, amounting to about 6.6 million in total, the largest graduating cohort ever recorded in China. This unprecedented massive incoming cohort of job market aspirants is heading for an untimely clash with the worst global economic recession in decades. Four months ahead of their graduation, polls in major cities in China indicate that, by late February 2009, only less than 20% of all prospective college graduates in Tianjin were able to secure a work contract. In the province worst hit by the crisis, Guangdong, only nine percent of college graduates secured a work contract by early March This is in sharp contrast to the last two years when, typically, 50-60% students were able to secure a job by This unprecedented massive incoming cohort of job market aspirants is heading for an untimely clash with the worst global economic recession in decades. late February. Since this economic crisis has yet to reach the trough, which may eventually arrive later this year in 2009 according to many economists predictions, employment prospects for university graduates are gloomy indeed. In most cases, unemployment of college graduates is attributable to job mismatch rather than absolute shortage in the supply of jobs. In China, college graduates usually have high expectations of salary and career prospects. However, with the onslaught of the financial tsunami, many highly paid jobs in the service sectors such as those found in IT, banking and multinational corporations (MNC) based in China, opened mainly to college students, have been withdrawn or left vacant. College graduates need to sharply lower their expectations in order to find a job, especially for jobs in the industrial sectors, which demand technical training often not taught in the academically oriented college curriculum. College graduates thus become losers in the current job market those unable to find jobs join the ranks of the unemployed and those who are lucky enough to find a job but end up with jobs that demand skills and qualifications perceived as training beneath east asian policy 35

5 their status. The resultant unemployment and underemployment is likely to become a perpetual source of frustration, discontent, as well as financial and social strains. Unlike migrant workers, college students belong to the politically strategic groups by virtue of their educational background, organisational skills and sometimes radical mindset. It is worth noting that they constitute the most vocal group within the 300 million netizens in China, now widely considered as the most politically active class in Chinese society today. Fortunately, college graduates usually have much more resources to weather the crisis, since most college students nowadays come from the urban middle class, a background that makes them economically better off and politically more vocal than migrant workers. For the same reason, they tend to receive more attention from the top leadership and are able to have their voices heard by higher authorities. As the Chinese economy recovers, they are likely to be the first to reap the benefits of recovery. Consequently, the possibility of social unrest caused by college graduates will gradually decrease as short-run shocks brought about by the crisis dissipate. Government Initiatives for 2009 All the potential sources of instability boil down to the lack of employment for these two groups: migrant workers and college graduates. For the migrant workers, since the problem is mainly cyclical shocks and immediate financial strains, the leadership has allotted top priority to ensuring social stability for them through job creation and welfare support. On the one hand, the government will try to create employment opportunities to make up for the loss of jobs resulting from decreased Chinese exports. Much of the four trillion renminbi fiscal prime pumping has the potential of generating employment through the construction of public infrastructure, road construction and housing projects. Experts project employment creation in the next two years to amount to six million jobs. However, taking implementation time and effectiveness of stimulus fund allocation into consideration, it remains to be seen whether this gigantic fiscal project alone can solve the bulk of the unemployment problem. On the other hand, it is likely that the government will reach out directly to laid-off migrant workers who are struggling with financial constraints and living on the verge of poverty in the cities by offering them various forms of transfer payment, subsidies and insurances to fulfill their basic needs and sustain their trust in governmental welfare. Government subsidised training programmes, now implemented in full-scale in Chongqing, are a viable and effective option, according to many scholars and government officials. Indeed, training programmes could bring about potential benefits and convey a very positive message to the whole migrant worker population, especially to secondgeneration migrant workers, who are relatively quick at learning and adapting. Last year saw an increasingly active role played by the NGOs in organising social events and responding to social crises, largely complementary to state interest. From this year, the government could also encourage and rely on the same NGOs for providing social support to migrant workers as well. 36 east asian policy

6 In addition, the government tends to encourage migrant workers to move back to their homeland on the promise that local governments will have effective plans to accommodate them. In fact, the rural area is in need of skills, expertise and knowledge acquired by migrant workers in cities. Returned migrant workers can act as agents of transformation in the countryside by helping to commercialise and industrialise the traditional farming rural economy. Like the unemployment problem for migrant workers, educated unemployment in the form of jobless college students needs to be addressed from its root causes which are the fundamental lack of employment in the economy. However, it is not easy to tackle this directly since the issue of educated unemployment is a structural, psychological as well as economic problem. A practical strategy of the government is to keep college graduates pre-occupied while at the same time helping them to adjust their expectations. Till now there are four major policies to tackle the problem of educated unemployment in this line. First, some local governments are prepared to set up trainee programmes for college graduates who are unable to match their qualifications with the technical requirements of the job market. In Shanghai, the municipal government is ready to provide over 30,000 trainee positions with tenure lasting from six months to one year for college graduates entering the job market, which are expected to reach 158,000 in Second, the Ministry of Education has allowed an expansion of 50,000 slots in this year s graduate programme enrolment. This is another delay strategy designed to help students enter the job market later with higher educational qualifications. Third, the top personnel management agency in China, the Central Organisation Department (COD) of the CCP will increase its recruitment of college graduates for the positions of village head, community leader and staff members in other grassroots units Returned migrant workers can act as agents of transformation in the countryside by helping to commercialise and industrialise the traditional farming rural economy. of the CCP. This programme was launched in March 2008 to absorb about 100,000 college graduates to fill the need for educated human resources in the CCP grassroots units and the rural areas. Fourth, some regional governments are experimenting with incentive packages tailored to encourage college graduate entrepreneurship. For example, in early March 2009, the provincial government of Liaoning implemented a policy to exempt graduate entrepreneurs from taxes for a period of two years. Scholars also urged local government across China to support graduate entrepreneurship by setting up entrepreneur incubators and implementing favourable tax policies. As short-term solutions, the first and second strategies work to delay entry into the east asian policy 37

7 job market for college students who are unable to match their expectations with job offers. The third strategy has the potential of becoming a major policy innovation with transformative and lasting impact on the countryside. On the other hand, it could also degenerate into an empty political campaign that may hardly elicit positive response from the increasingly practical and pragmatically minded college graduates. In comparison, it might be more effective to encourage college graduates to search for jobs in western and central China where opportunities are abundant and the impact of financial crisis is less severe. In fact, this movement of talents is an ongoing process that could serve to even out distribution of human resources and reduce development gaps in the long run. As for graduate entrepreneurship, many people in the business arena, including one If the report is true that less than 20% of prospective college graduates had found a job by late February this year, China will have a serious problem looming large on the horizon. 38 east asian policy of the most famous IT entrepreneurs in China, Ma Yun, have listed high risk, limited scope, difficulties in finance and lack of experience as potential weaknesses in the plan for college graduates to become entrepreneurs. It is still too early to tell how effective these strategies are, but it is important for the government to be seen taking quick and decisive measures. So far the Chinese government has scored well with the people for its quick action in announcing the four trillion renminbi stimulus package. For the time being, there is a fair amount of confidence in China as the first major economy in the world to recover and rebound. As long as the confidence remains strong, the CCP will be in a better position to deal with rising social tensions. Rising Protests, but still Politically Manageable Since the late 1990s, Chinese officials have begun to realise that rising social protests have become a reality, and that grievers often have legitimate complaints about unemployment, illegal taxes, forced eviction, loss of farmland and numerous other developmental problems that China could not solve any time soon. Along this line, the CCP now focuses on containment and management of social protests rather than suppression and deterrence. In anticipation of rising social unrest in 2009, it reiterated this point to county party secretaries and security chiefs through group training programmes in Beijing and warned against any relentless use of sheer force in quenching social protests. The containment and management strategy has worked well thus far. Chinese grievers have not been able to launch broad-based protests that cut across occupations and regions. The same pattern is likely to continue for migrant workers in Despite the

8 unprecedented scale of unemployment, migrant workers low socioeconomic status and de facto secondary citizenship prevent urban residents from joining the protests. Urbanites are more likely to side with the government if the protest in urban centres turns violent and confrontational. College graduates are also constrained in their ability to mobilise wider support for their protests over unemployment. Job prospects vary with the reputation and location of the university as well as the qualification and performance of the student. College graduates with job offers tend to be more resourceful and tend to come from better universities. They are unlikely to join hands with their jobless counterparts for protests over unemployment. College graduates are therefore divided along various lines, which prevent them from becoming a homogenous group. The cleavage becomes meaningless, however, if the majority of college graduates cannot find a job. If the report is true that less than 20% of prospective college graduates had found a job by late February this year, China will have a serious problem looming large on the horizon. It would be the first time ever that millions of college graduates share the same problem with an even larger number of migrant workers. The CCP has to hope that either the report is untrue or that the situation will improve substantially in the coming months. The CCP, however, cannot take popular confidence for granted. It will face the real test in the second half of this year. If the promise that China s economy will be the first to rebound is not delivered, and if the job market does not improve, the current government will be perceived as incompetent and ineffective, and its legitimacy will be undermined. In such a scenario, any seemingly minor issues can be easily politicised to become a powerful mobilising force in collective actions. While this scenario does not look very likely given the state capacity, the CCP has to work hard to prevent any popular perception of government failure. east asian policy 39