Unemployment in China? Yes, if you're a college grad

06/03/2010 1:58 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Question: True or false? Workers’ pay is rising in China

Answer: It depends on which workers.

For blue collar manufacturing workers in China’s export industries, the answer is True.

 Foxconn, the subsidiary of Taiwan’s Hon Hai Precision that assembles Apple’s iPod, iPhone, and iPad (as well as products for Hewlett-Packard, Dell, and Sony), will raise pay for its workers by 30% after a series of worker suicides.

Honda has offered raises of 24% to settle a strike at its Foshan transmission plant.

The government in Shenzhen, a key manufacturing center, will raise the minimum wage there by 10% to 20% on July 1.

Wages have roughly doubled over the last five years for blue-collar workers in the export factories in the region around Hong Kong.

But for college graduates, the answer is False.

China is suffering a glut of college-educated workers that has led to a decline in pay. One Chinese company told the New York Times that a recent graduate with a degree in computer science would have commanded pay of $585 a month ten years ago but is paid just $512 a month now.

And that’s assuming the college graduate gets a job offer at all. 20% of graduates with a B.A or B.S. would be willing to work for free in their first job because it is so hard to find work, according to a recent survey by the Communist Youth League Beijing Committee.

While big cities have growing numbers of unemployed college graduates—often single children whose families have spent all their savings on a university education—the coastal manufacturing regions can’t find enough workers.

As a very short-term fix, the Chinese government has been requiring state-controlled companies to hire large numbers of the college-educated unemployed and encouraging manufacturing companies to move inland to areas where it’s easy to find workers.

In the long-term you can bet that the planners in Beijing will be looking to encourage the growth of industries that will absorb this college educated workforce.

Just another reason that China will aggressively climb the value-add ladder in industries from autos to telecommunications equipment.

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