Why is the problem of unemployment become critical, and what is the current Chinese policy in relation to unemployment?
...ion are able to enter the tertiary education . Opportunities for gainful employment are scarce, even for highly qualified and motivated young people. The agricultural industry is shrinking with foreign products entering the market, there are about 130 millions surplus rural workforce , and it is expected to rise by millions in the coming future . Take Anhui Province as an example, there has been 6 million people going to better-off urban areas for jobs. This is because the unemployment rate in the village reached about 50%. As peasants, they can choose either staying as idle in the rural areas or seeking the opportunities to be migrant workers in the urban areas. More than 100 million people have abandoned their home towns, with 30 million alone heading to the Pearl River Delta, mostly to find low-level factory jobs . Many of them are exploited by factory owners in terms of low wages and poor living and working environment. In fact, there are millions of new jobs created every year, but too many people chasing too few jobs. In the next 30 years, the working age population in China will continue to increase in a sustained manner. According to a prediction by State Statistical Bureau, China’s population in the 15-60 age group will be 970 million by 2010 and peak at about 997 million by 2020 . This shows that the too large a growing population has led to an over supply of labour and a strong impact on the economic development in China. Economic restructuring The economy in China is facing a large-scaled restructuring period. It has entered what is perhaps the most dangerous phase yet in its transition to a free market economy. Firstly, the problem of laid-off workers mentioned above is one of the typical cases. The non-performing state-owned enterprises are restructured under the economic reform. It is an inevitable historical process in the development of China’s economy. Secondly, the agricultural sector has become a major source repelling employment. In the 90’s, the agricultural sector repelled more than 6 million agricultural labour every year on average . Thirdly, China’s manufacturing sector is in transition from shortage economy to oversupply economy . Traditional labour-intensive industries are shrinking, such as the textiles and garments. Hence, the structural economic change is a major cause for the unemployment problem of China. After joining the World Trade Organization, Beijing has to lower trade barriers, that means more foreign competition pressuring China’s vulnerable industries, for instance, telecommunications, car-making, agricultural sector and medical care products. Although 2-3 million job opportunities will be created after entering WTO, an additional increase of 3-4 million unemployed has been found whereas agriculture suffers the most. Traditional Chinese farmers are definitely weak competitors when compared with the mechanized agro-business in the United States, Chen Huai, a senior researcher at the Development Research Centre (DRC) predicted that 150 million farmers would move to cities looking for jobs in the next 10 years . In the coastal provinces, millions of laid-off workers and farmers are looking for the same jobs. However, the private sector cannot sustain such a large labour surplus. Though there are twice as many private-sector jobs nowadays as there were five years ago. Yet it is not adequate enough to generate jobs to keep pace with unemployment. According to Labour and Social Security Ministry, jobs in state-owned enterprises decreased by 43 millions but the private-sector jobs increased only by 16.5 millions between 1997-2000 . It evidently shows that the structural unemployment problem is difficult to solve even there is a strong economic growth in the private sectors. The economic restructuring, WTO requirements and also the fast progress in science and technology demand high quality workforce, it is estimated that about 95% of jobs require employees to be familiar with information technology . But the general standard and quality are still inadequate to meet the requirement. And the technical progress is basically a process of reallocation of labour in which new jobs created are less than the old jobs it has destroyed. So the unemployment problem is critical in the sense that it will progressively increase in the foreseeable future. Problems of Unemployment Heavy government burden In the process of economic reform, China lacks a well-planned employment system to deal with the problem. It does not have effective institutions that can administer job programs and subsidize the unemployed. As the laid-off problem is so prominent, Beijing has been trying to placate the XG workers with severance pay on a case-by-case basis . But the Central Government lacks a national unemployment benefits system. The state enterprises and local governments can no longer support the unemployed by providing unemployment benefits or allowances to them. Under the circumstances, Beijing tends to adopt the policy of forcing laid-off workers back to the job market more quickly by cutting their benefits. Some of the provinces have already implemented the budget-cut policy. In the Liaoning Province, the unemployed have to rely on their own after receiving $30 per month in a two-year period. The rest of China will join the experiment in 2003 . Without assistance from the government, the unemployed have to live by their own means. According to Time Magazine , many of the SOEs have owed a large sum from the government. Due to the serious XG problem, China is facing dilemma of continuing subsidies to SOEs or terminating them. In fact, China’s banking system has a huge bad loan to SOEs that totals as much as half of China’s GDP with no hope of repaying them. There is also the debt China will incur when it has to follow through on promises to pay worker pensions, which equals 70% of GDP. So the Chinese Government is actually facing extreme financial difficulty in dealing with unemployment. Cutting subsidies to SOEs and reforming SOEs are unavoidable to improve the country’s financial status, but the cost on the public is high. The XG workers are deprived of services that were once free. Social discontent is irrepressible and can reach a dangerous level. Hinder economic development The serious high unemployment rate contributes directly to 2% - 4.5% of GDP loss . The higher the unemployment rate, the bigger the GDP loss. The government expenditure is spent to solve the problem, the productive labour is in idle and the lack of confidence in the economy may result in deflation. And high unemployment rate is an unfavorable factor to attract investment. When the unemployed population is increasing, it is sure that living standard of those people drops and poverty problem will be intensified. Social instability The most prominent crisis of high unemployment is social and economic instability in PRC. In March 2002, angry workers in city of Liaoyang in Liaoning protested outside the city hall for wages and pensions cuttings. The demonstration began at a few factories and quickly drew workers from all over the city . “At the same time, 30,000 workers from China’s biggest oil company, PetroChina, besieged their factory in the northeastern province of Heilongjiang to demand more severance pay even though they had received more than $10,000 each----a fortune by the standards of most unemployed. Encouraged, thousands of workers in other cities such as Fushan in Liaoling and Lanzhou also launched protests against layoffs.” This kind of protest is not rare in China nowadays. Since the economic reforms in 1978, the Chinese people are more aware of their rights. They know how to organize themselves to protect their rights and voice out their dissatisfaction. The government has a greater possibility to face the outbreaks of labour unrest since the Tiananmen Square Protest of 1989. It imposes a real danger to Chinese social, economic and political system. When labour supply is excessive, the employers have a higher tendency to exploit their employees, especially those migrant workers who have little choice. A huge number of workers may not be able to receive salary and fringe benefits from their employers. This is closely related to the fact that the legislations are not well-equipped on one hand, and labour supply exceeds demand on the other. Those workers endure long working hours but get little pay as return. The sharp rise in the number of laid-off worker has given a sharp rise in the labour dispute cases, involving about 200,000 workers . Workers show discontent over the factory owners or their leaders can gradually shift the grievances towards the government. It can undermine the social stability. The increase in the unemployed population has led to many criminal cases, the desperate unemployed will seek the chances to earn quick money like robbery, theft and so on. As too many people are competing for the scarce job opportunities, the gap is being filled by petty crime, prostitution and menial labour that cannot be called real employment. Unemployment rate is higher in the northern, western and interior regions, those inner provinces have a slower development than the coastal areas. The high unemployment rate accelerates the poverty problem in these regions. There is an unequal distribution of wealth among the coastal cities and inner cities. The imbalance of development is another threat of social stability. Current Chinese Policies Employment Service System Since1980s, China has set up and improved the employment service system, which includes employment agencies, employment training, unemployment insurance and employment service enterprises. The system offers guidance, consultation and agency services to job seekers and employers . This definitely can help the unemployed and the laid-offs to secure a job more easily. Unemployment Insurance The unemployment insurance system was set up in 1986 to guarantee the basic livelihood of the laid-offs. The system extended to cover all types of economic sectors and employees since 1999. The scheme was financed by employers contributing 2% and employees contributing 1% . The fund is mainly used paying allowance to the unemployed, providing retraining courses and supporting reemployment service centres. Actually, its covers 46.8...