China could be facing a hard choice over painful job losses

Since 2002, China’s economy has undergone significant changes, including a shift from acceleration to deceleration of growth in gross domestic product. Yet the official urban unemployment rate, jointly issued by the National Bureau of Statistics and the Ministry of Labour and Social Security, has remained remarkably steady, at around 4-4.1 per cent. Since 2010, it has stood at precisely 4.1 per cent. This is surprising, to say the least – and has led some to ask whether the bureau could be fudging the numbers.

The hidden cracks in China’s employment figures

The bureau is not lying; it simply lacks data. The unemployment rate provided reflects how many members of the registered urban population have reported to the government to receive unemployment benefits. But, unlike in developed countries, China’s piecemeal unemployment insurance and underdeveloped re-employment programmes weaken the incentive for people to seek assistance.

As a result, the bureau’s unemployment figures are far from accurate.

China’s government has moved to remedy this, by carrying out urban unemployment surveys. But, despite having been collected a decade ago, those statistics have yet to be released.

In lieu of convincing official figures, some economists have taken matters into their own hands, using data from the urban household survey to estimate the real unemployment rate. Extrapolating from such data gathered in six provinces, Han Jun and Zhang Junsen, for example, concluded that, in 2005-2006, Chinese unemployment stood at around 10 per cent. Using urban household survey data from almost all of China, Feng Shuaizhang, Hu Yingyao, and Robert Moffitt calculated an average urban unemployment rate of 10.9 per cent from 2002 to 2009 – the highest estimate ever produced.

But these estimates are just that – estimates. Because urban household survey data is not freely available, different people obtain results for different years and provinces from the various sources they could access. This has caused considerable frustration for researchers, and has resulted in estimates with ranges so wide as to be statistically insignificant.

Graduates with masters degrees offered monthly salaries of 1,600 yuan at job fair in northern China

In our own research at Fudan University in Shanghai, my two PhD students, Xu Liheng and Zhang Huihui, and I managed to obtain a reasonably broad supply of official statistics: the 2005-2012 data for four provinces, the 2005-2009 data for three provinces, and monthly data for 2010-2012 for four of these seven provinces. While the sample is technically small, the provinces for which we acquired data represent the coastal, inland, and northeast regions. With the right adjustments and processing, we were able to infer the unemployment rates in different kinds of provinces and municipalities, thereby estimating the real nationwide unemployment rate.