The Shortage of Skilled Labor in China

08/05/2009 10:25 am EST

Focus: MARKETS

Robert Hsu

Editor, China Strategy and Asia Edge

Robert Hsu, editor of China Strategy, examines why there’s such a shortage of managerial talent in China, despite a booming economy and a wealth of opportunities.

Despite China’s having the largest available labor pool in the world, there is a shortage of skilled and experienced workers. Basically, China is a country with an abundance of unskilled labor. Because of the low skill level in Chinese employees, it is very convenient for these workers to find jobs in simple services that don't require a lot of knowledge or training. Yet, while there are many workers, there are not enough managerial talents.

There are four main reasons why China's unemployment rate, especially for recent college graduates, is so high:

1. Impractical college curriculum.  Much of the education and training at Chinese universities does not match what employers are looking for in new hires. That's because the government-mandated curriculum often contains many required courses in subjects such as Marxist economics.  The increase in quantity and decrease in quality for both colleges and students made college diplomas a less valuable commodity, leading to stagnation in starting wages for college graduates.

2. Unmotivated job seekers. Low starting wages combined with the tight-knit nature of Chinese families made many college graduates less motivated to find work. Because traditional Chinese parents and grown children tend to support one another, many jobless college graduates move back with their parents. Also, many college graduates want to start their own businesses [and they] add to the unemployment statistics until their businesses are successfully up and running.
 
3. Inefficient job market. Because China's economy is changing so rapidly, there are market inefficiencies between job seekers and employers. For instance, many of the better employment opportunities, especially managerial-track positions at top state-owned enterprises, are often open to those with good connections, not everyone.

4. Training of migrant workers. China has a strong workforce of 200 million migrant workers who move from the countryside to cities, providing cheap and highly efficient labor for the country's export industry. But as exports declined during the global economic slowdown over the past two years, export-manufacturing jobs were lost and more than 20 million migrant workers were displaced.

The shortage of managerial talent bids up the wages for skilled executives while the multitude of unskilled workers is paid very little—all of which contribute to the country's wealth disparity.

Overall, I think the unemployment situation will correct itself as the country's labor pool churns out more and more high-quality workers. Sure, China's job market is suffering from a lacking higher education system, inefficiencies between job seekers and employers, and low ambition from recent graduates—all of which is adding to the high unemployment numbers and wealth disparity in the country.

But these issues have also created opportunities for smart entrepreneurs in education and information technology to profit. And higher-quality workers will increase the country's economic productivity and growth.

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