Oversupply of College Graduates? Structural Mismatch!

Summer heat is spreading, but the labor market in China remains cold. 6.99 mn college graduates, a historical high, are set to leave school and enter the labor markets soon. However, only 35% of graduates had managed to secure a job by April, compared to 47% by April in 2012. This tough figure implies that two thirds of graduates might be facing unemployment. According to the “2013 College Graduating Students Job Hunting Report” by Zhaopin.com, companies in Shanghai received on average 101 resumes for each job opening, compared to 69 in last year. The figure is 96 in Beijing, 115 in Guangzhou, 109 in Shenzhen and 102 in Suzhou. Adding to this problem, the number of college graduates hit a historical high of 6.99 mn this year. Since colleges in China started their enrollment expansion, total admission grew from 1.6 mn in 1999 to 2.12 mn in 2003, 6.57 mn in 2010, 6.85 mn in 2012, and 7 mn in 2013, representing an annual growth rate of 11.83%, a figure higher than China’s GDP growth. The mismatch trend will continue and even intensify for the coming years, likely to leading to rising unemployment in urban China.

The increasing difficulty for college graduates in the job market is caused by multiple factors, including distorted job expectations toward openings at the public sector and SOEs, structural labor mismatch across sectors and regions, and a larger mismatch between the national education system and labor demand.

Twisted job expectations toward openings at the public sector and SOEs

Becoming a  public servant has become the most popular choice for college graduates, as these jobs are stable, well-paid, and powerful. For example, there are 20,839 openings for public servants opening this year, but 1.12 mn applicants took the qualification exam, representing a 1.87% acceptance rate, compared with 6.29% in 2003. The number of students taking the public servant entrance exam has grown by a factor of 10 over the past decade, outpacing the growth of college graduates which tripled during the same period. The proportion of public servant applicants to total graduates rose from 4.1% in 2003 to 14.1% in 2012.

Annual Wage Accross Sectors

Public Servent Applications

Influence of the government is also enormous in non public sectors. State-Owned Enterprises (SOEs), often with monopolistic positions, offer a semi-public servant choice. Jobs at SOEs often offer good wages and benefits with high job security. The average yearly salary in SOEs amounts RMB 48,357 compared with RMB 28,752 in non-SOEs in 2012. This gap persists across all sectors; the annual wage gap between state and non-state enterprises in Scientific Research is the largest, followed by Mining and Electricity & Gas sectors.

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