In remote corners of Shanghai, the ghosts of Maoist industrialisation rise from the ashes of the planned economy. Behind massive supermarkets, internet bars and other symbols of the reform era prosperity, decrepit, abandoned factory buildings, once the lifeblood of socialist enterprise, stand like so many iron gravestones.
But perhaps the most alarming vestiges of outmoded behemoth heavy industry are harder to spot. Laid-off, or xiagang, workers, displaced from state-owned work units that once promised lifetime job security, are invisible in more ways than one. As state-owned enterprises in old industrial centres shut down, several million workers must face jarring economic insecurity after decades of relative stability under a massive welfare state.
Labour unrest in 'rust belt' industrial bastions like Liaoning indicate that laid-off workers are becoming desperate, unprepared for the competitive market economy. Mass unemployment even plagues Shanghai, the country's pre-eminent boomtown. The city's once-flourishing textile industry shed 44 per cent of its workforce in the late 1990s, laying off more than 400,000 skilled labourers.
In recent years, China's official unemployment rate has risen to 4.2 per cent, especially since the government began shifting xiagang workers out of welfare centres run by employers into the registered unemployed category. Yet analysts at the Chinese Academy of Social Sciences calculate the urban unemployment rate at 12 per cent and rising. The severity of the problem is difficult to gauge since the rate does not include laid-off workers who have not terminated state-owned enterprise contracts, surplus rural labourers, migrants, or state-owned enterprise workers employed in posts that are basically defunct.
The government announced plans two years ago to create eight million new jobs to absorb laid-off workers by strengthening the service industries, developing re-employment programmes, and implementing preferential hiring, tax and loan policies for xiagang workers. These measures are underpinned by the misguided hope that in the long-term, modernisation and the global market will rescue the refugees of socialism's breakdown.
But the Chinese leadership must address more fundamental issues: a lack of morale and flexibility among workers, and a rigid welfare system. Urban workers, whose factory jobs were previously the most coveted in the nation, often avoid 'lowly' service jobs like domestic work. Many unemployed people, moreover, have little faith in government programmes and prefer to rely on themselves.