by BARRY EICHENGREEN
It may stretch credulity to think that a high-growth economy like China might soon be facing similar problems. But the warning signs are there. Given the lack of political freedoms, the Chinese government’s legitimacy rests on its ability to deliver improved living standards and increased economic opportunity to the masses. So far those masses have little to complain about. But that could change, and suddenly.
First, there is the growing problem of unemployment and underemployment among university graduates. Since 1999, when the Chinese government began a push to ramp up university education, the number of graduates has risen sevenfold, but the number of high-skilled, high-paying jobs has not kept pace.
Indeed, the country is rife with reports of desperate university graduates unable to find productive employment. Newspapers and blogs speak of the “ant tribe” of recent graduates living in cramped basements in the country’s big cities while futilely searching for work.
In part, these unfortunate outcomes reflect the inflexibility of China’s education system. Students spend their entire four years at university studying a single subject, be it accounting or computer science. As a result, they have few skills that can be applied elsewhere if the job they expect fails to materialize. There has also been a tendency to push students into fields like engineering, even though the Chinese economy is now beginning to shift from manufacturing to services.
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Moreover, there is the problem of less-skilled and less-educated migrants from the countryside, who are consigned to second-class jobs in the cities. Not possessing urban residency permits, they lack even the limited job protections and benefits of workers who do. And, because they may be here today but gone tomorrow, they receive little in the way of meaningful on-the-job training.
The migrants’ predicament underscores the need to reform hukou, China’s system of residency permits. A handful of provinces and cities have gone so far as to abolish it, without catastrophic consequences. Others could usefully follow their lead.
The Japan Times for more