Steep learning curve for the workers
Last week, we mentioned that one reason behind the apparent shortage of labour in the Pearl River Delta is a significant improvement in the education level of the workforce. The education boom will be one of the biggest influences on economic development over the next 20 years. Today, China is a land of cheap factory labour. Tomorrow, it will be the land of cheap technical labour. The day after, it will the land of cheap PhDs.
As we pointed out last week, the proportion of junior secondary school graduates entering senior secondary school jumped from 40 per cent to 50 per cent during the 1990s, and soared to 60 per cent last year. In 1995, new enrolments in senior secondary schools (including vocational schools) accounted for just 10 per cent of all school enrolments. Last year, the figure was 24 per cent.
During the same period, annual new enrolments in schools at the junior secondary school level and below declined, from 447 million to 425 million, while enrolments in upper high schools rose from 51 million to 132 million.
Part of this is simple demographics. China had a big bulge of school-age children in the 1990s, which is now translating into a big bulge of pupils in secondary and tertiary schools. Meanwhile, enrolments in primary schools are depressed because the first generation of one-child family children is now producing its own one-child families.
Nonetheless, the evidence is strong that an ever-higher proportion of students are opting for higher levels of education.
The increase in the proportion of students going beyond the nine years of compulsory education ending in junior high school has important implications for the manufacturing economy, which relies heavily on junior high-school graduates for its labour force. The more education people get, the less likely they are to seek a factory job. Or they will be more demanding on wages and working conditions. The clear implication is that over the next 15 years, while China will have no shortage of factory labour, it will be necessary to reward this labour with rising wages and better conditions.
Moving to the university level, it is clear that China is heading for a huge increase in the supply of technical labour. Between 1995 and 2000, the annual number of graduates from China's colleges and universities rose by just 18 per cent. Between 2000 and last year, it doubled, to 1.9 million. In four years, it will double again.
Tertiary education in China remains strongly biased towards engineering and science. Last year, 44 per cent of university graduates, and 41 per cent of new enrolments, were in engineering or science programmes. Put another way, the number of people enrolling in engineering and science courses in Chinese universities last year (1.6 million) is more than double the total number of university graduates from all programmes in 1995.
The obvious implication is that the shortage of technical personnel now reported by many firms (especially in Guangdong province, which has an especially poor higher-education system) will likely end in a few years. This, in turn, means that China should move up the manufacturing value chain fairly rapidly.
Of course, the statistics tell us a lot about quantity, but very little about quality. Skilled local managers, in particular, are in short supply. Management skills are acquired, for the most part, not in school, but on the job. Closing China's management gap will take a long time and will not be solved simply by pushing more people through the educational system. This lack of skilled management is likely to constrain Chinese companies for some years to come. But on the whole, China seems to be doing a better job of preparing its workforce for a 21st-century economy than most countries.
Research by the China Economic Quarterly
