Economists Say: Imploding from Employment Pressure in China
In a recent NY Times Article
, Jim Yardley offers us the tale of a casual laborer and a college student in China, interspersed with economic analysis.
With China's leaders struggling to engineer a soft landing for the country's overheating economy, Zhao Guangxi and Zhou Ruidong face a problem more typical of a country mired in a deep recession. Neither man can find a job.
The prospect that China's torrid economy could crash-land is spawning fears of a real estate bust, a banking bailout and a wave of inflation rippling around the world. Most experts discount such predictions, but even if China does land softly, such good news is still bad news in terms of unemployment.
By putting the brakes on economic growth, even gently, China is slowing an economy that must roar just to keep unemployment from rising. Employment pressures are so great that even as growth neared double digits in the last 12 months, urban unemployment still rose. In the countryside the situation is far worse.
I would hope most experts discount the possibility that rapid slowdown in China's economic growth could sent "a wave of inflation rippling around the world!" Usually, slower growth is associated with lower inflation, which is one reason why China's leaders hope to slow down the economy. I won't even touch "inflation rippling around the world."
And why does the economy "have to roar just to keep unemployment from rising"? We're later told that "economists say" this, but Yardley doesn't really explain. The implication he seems to draw from this that China is in pretty big trouble, bowed down under the weight of tons of "employment pressure." This might make some sense if "employment pressure" meant population growth, but China's population and labor force growth are about 1-1.5%, not especially rapid. So I think Yardley just means that 7% (the rate to which China is hoping to decelerate) is very rapid growth and he doesn't understand how China can keep it up, so he expects doom.
A much better explanation is simply that China is experiencing very rapid productivity growth, which is why its economy is growing so fast. "Productivity growth" is an abstract way of saying that inefficient factories are being shut down and agriculture is being mechanized, leading many to lose their jobs. Most find better jobs (which is why productivity is rising) but with so many in transition, not everybody is doing well. The day laborer, a migrant from the countryside, is an example of a very real problem.
The College Student
The central conceit of the article is that the problems of the day laborer and the college student are in some way parallel, caused by the same grand economic problems, but they're pretty clearly not. The college student is a month from graduation but hasn't found a job, a situation that used to be uncommon. Yardly quotes an economist who tells us the reason for this: it's because China's college enrollment has quadrupled over the last six years.
Enrollment has quadrupled! That seems a pretty straightforward explanation for why college students are finding it harder to get a job. There's a glut of college students on the market. For some reason Yardley continues to offer other explanations such as "employment pressures" and "the job market is more competitive, particularly since traditional employers like state-owned enterprises are trimming down," but the real story is pretty obvious.
Ultimately this article tells me something interesting that I didn't know: China's been hugely expanding college enrollment. But it's surrounded by so much pseudo-economic analysis that the nugget of news is pretty hard to find.