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Caixin Global

Editorial: To Stabilize Employment, Trust the Market

An on-campus job fair was held at Shandong University of Science and Technology in Qingdao, East China’s Shandong province, on May 10. Photo: VCG

There are severe changes to stabilizing China’s job market. In Yunnan province Wednesday, Premier Li Keqiang attended the latest of several meetings concerning the issue. These meetings have produced statements like: “Current employment trends in China are complex and severe,” “employment faces further challenges,” and “employment is now more of priority than ever.”

These show policymakers are clearly aware there is a problem that needs to be dealt with urgently.

According to the National Bureau of Statistics on May 16, China’s surveyed urban unemployment rate came in at 6.1% in April, up 0.3 percentage points from the previous month and the highest since March 2020. The rate for workers between the ages of 16 and 24 was 18.2%, the highest on record in the country — and far higher than the figures for Europe and the U.S.

Considering the country’s shrinking labor force, the current dire employment situation is all the more unusual. Causes of China’s unemployment include the short-term impact of Covid, lagging effects of contractionary policies, cyclical unemployment due to the economic downturn and structural unemployment due to industrial restructuring. These complex factors make the challenge all the greater. However, when you boil it all down, the key to stabilizing the situation is to trust in the market.

Reliance on synergy between economies of scale and division of labor allows the market to provide numerous jobs. The key lies in whether the market suffers from institutional distortions.

Employment is a priority because it is so closely linked to people livelihoods, consumer spending, and social equality and stability. Vulnerable groups such as low-income people, urban “floating populations” and elderly workers deserve additional concern, with youth employment being a top priority. Not being able to find a job after university can do lasting damage to a young person’s career and can even cause psychological trauma. This is why employment stability is a key socio-economic issue.

Addressing this urgent issue requires both effective short-term initiatives and comprehensive long-term measures. Li said targeted measures designed to maintain economic growth could be released and implemented in May. This was on point. Correct economic trends underlie employment stability, and coordinating Covid-19 control and economic development is key to these. Authorities should implement as many pro-employment policies as possible. The central government has implemented stronger employment policies, such as guiding financial institutions to reschedule the loan interest payments of small and midsize enterprises (SMEs), as well as the self-employed, enhancing support for innovation and entrepreneurship, improving graduate employment and entrepreneurship services and expanding work-relief programs. However, implementation of these policies must be aligned with a normal economic recovery. Many local governments’ fiscal revenues have plunged, significantly hurting their ability to implement new policies.

All employment stability measures ultimately affect people. Increased effort should be put into supporting the unemployed by improving their qualifications through measures like technical training. The “urban floating population” is a direct victim of Covid-19, so people-oriented ideas for more friendly policies must be adhered to. The unemployed are best placed to comment on the effectiveness of employment policies.

In the current context, eliminating excessive Covid controls is the major priority. Harsh, possibly illegal containment measures have made it difficult for the “floating population” to find jobs. This has disrupted logistics systems, leading to stagnating consumption, weak demand and abnormal difficulties for business, eventually increasing pressures on employment. The service sector has suffered a heavy blow from Covid-19, with many SMEs struggling to survive, even though this sector has the greatest potential to provide jobs. The strange status quo of one-size-fits-all, gradually tightening epidemic control measures should not only be ended, but accountability measures should also be introduced.

Employment stability requires gradual relaxation of existing contractionary policies. Stabilizing market entities is crucial to the stability of both growth and employment. The central government has required relevant authorities to exercise caution when introducing measures that are at odds with one another. Inappropriate contractionary policies should be abolished. The central government has supported the platform economy’s healthy and sustainable development via legalizing the listing and financing of platform and digital economy enterprises, both at home and abroad. This has sent positive signals. Policymakers should formulate economic policies that serve market entities, and fully consider their impact on employment. At the Yunnan meeting, it was stressed that effective measures to boost confidence in the development and growth of private enterprises, to create institutional rules and a stable, transparent, fair and competitive business environment, to stimulate innovation, and to expand openness, all constitute “infrastructure” required by the economy to regain momentum. While these might not have immediate effects, they will be beneficial in the long run, helping not only to stabilize expectations but also employment.

Increasing support for entrepreneurship and innovation unleashes market potential. As the service sector becomes the core of China’s economy, market access and regulation reforms have been put on the agenda. Reforms in household registration and land should also be promoted, to allow freer flow and a more reasonable distribution of factors of production. The more than 10 million college graduates entering China’s labor market each year are a valuable human resource for socioeconomic development. Their talent must be allowed to flourish in order to support employment and high-quality development. Recent news of a woman with a doctorate from Peking University in nuclear physics becoming a city manager, and large numbers of highly educated people competing to become civil servants at the township level, has led to a deep consideration of the underlying institutional factors.

Employment has always been an issue in China. Under the planned economy, more than 18 million officials and workers were sent to rural areas in the wake of the Great Leap Forward. Disguised unemployment was a serious problem. After reform and opening-up, at the turn of the century, mass layoffs occurred, creating severe social problems in China. However, thanks to the three-year reform of state-owned enterprises and China’s accession to the World Trade Organization, the economy took off, creating a favorable hiring environment. All in all, reforms must be implemented to tackle the challenges ahead, and provide desirable jobs for the majority of the population.

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