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In October, the surveyed jobless rate was 5.3 per cent, down from 5.4 per cent in September, according to the National Bureau of Statistics (NBS). Photo: AFP

Economy China Economy

Explainer | China unemployment rate: how is it measured and why is it important?

China provides an official surveyed unemployment rate but it does not include 149 million self-employed business owners and nearly 300 million migrant workers
The rate rose to historic levels in the wake of the coronavirus pandemic, but since then has gradually retreated to near pre-pandemic levels

Jobs

Brian PeachandSidney Leng

Published: 5:30pm, 17 Nov, 2020

Why you can trust SCMP

How is China’s unemployment measured?

The official surveyed unemployment rate for urban workers in China rose to historic levels in the wake of the coronavirus pandemic, touching a nearly two-decade high of 6.2 per cent in February. Since then, the figure has gradually retreated to near pre-pandemic levels.

In May 2021, the surveyed jobless rate stood at 5 per cent from 5.1 per cent in April.

Beijing has set a target of creating over 11 million new urban jobs in 2021 and a surveyed urban unemployment rate of 5.5 per cent.

China’s official jobless indicators are released on a monthly or quarterly basis, but because they only cover part of the job market, it is hard to gauge the real state of China’s unemployment situation.

For the whole of 2020, China’s surveyed jobless rate was 4.7 per cent compared with 5.5 per cent the previous year.

China’s government set a target of creating 9 million new urban jobs in 2020, compared with 11 million in 2019. Data released for 2020 said that there were 11.86 million new urban jobs created in China, 131.8 per cent of the target.

Beijing expressed its concerns about the national employment rate in the first half of 2020, given its importance to social stability in the world’s most populous country.

For the first time in decades, China’s labour market came under pressure on multiple fronts – a challenge that was underscored during the first quarter when the country posted its first economic contraction in more than 40 years.

China’s accelerating economic rebound in the third quarter of 2020 failed to significantly improve job prospects for the country’s young and educated, reflecting a weak link beneath headline growth figures that have been largely engineered by state spending and industrial production.

The number of temporary jobless workers in China in 2020 could have ranged between tens of millions and 250 million, according to various estimates.

Why is China’s official unemployment rate seen as unreliable?

No government data set offers a clear picture of the job market, and most economists believe official figures underestimate joblessness.

Among the groups not adequately counted are China’s 149 million self-employed business owners and nearly 300 million migrant workers, who regularly travel from their rural hometowns to find employment in urban areas.

Unlike developed economies, which typically offer a broad range of employment indicators, China has historically relied on only two figures for unemployment data – both of which have shortcomings.

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Before 2018, Beijing published data on how many urban workers registered with the government when they lost their jobs. Data from local authorities excluded migrant workers who were not born in the city in which they worked and were therefore not eligible for social benefits. To be counted as unemployed, people also had to be between the ages of 16 and 59.

The data was detached from the reality of the overall labour market, particularly during the global financial crisis of 2008-09, when more than 20 million migrant workers became unemployed but the headline jobless rate barely moved.

Since 2018, China has used a monthly survey-based unemployment rate as its main indicator. The data captures all regular urban residents, does not include an upper age limit and the NBS claims it also includes migrant workers, although this is disputed by analysts.

But to be considered unemployed, a worker needs to have been actively looking for a job in the past three months and be able to start work within two weeks; otherwise, he or she is not counted as employed or unemployed.

Series: The grim outlook for Chinese unemployment

Does China have an unemployment crisis?

Over the past few years, China’s labour market stability has been underpinned by a rise in service sector jobs, allowing newly laid-off factory workers to take up employment as delivery drivers or shop workers.

But the coronavirus broke this virtuous cycle, fanning the government’s worst fears about massive unemployment and the potential for ensuing social unrest that could undermine its grip on power.

“The downward pressure on China’s economy has increased significantly, and the employment situation has continued to deteriorate,” wrote Ouyang Jun and Qin Fang, two economists from Southwestern University of Finance and Economics in Chengdu, earlier in 2020.

“After the coronavirus outbreak, the already difficult task of stabilising employment became more complicated and harder to manage.”

The employment situation has improved as the economy has recovered faster than expected, but many workers in labour intensive industries and new university graduates remain unemployed or under employed.

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What benefits are available to China’s unemployed?

As the coronavirus took a heavy toll on jobs, China’s Ministry of Human Resources and Social Security vowed to make it slightly easier for people to claim unemployment benefits by reducing paperwork.

Earlier in 2020, China announced a modest package of welfare support to help some of its most vulnerable citizens, including migrant workers, but this was limited in scope and excluded the vast majority of workers affected by the virus.

China has not implemented a broad-based, wage-protection scheme requiring employers to maintain headcount and pay workers. As a result, most furloughed workers have no source of income.

Under China’s social security regulations, an employer is required to make contributions to the five types of government-provided insurance schemes – pension, health care, unemployment, work injury and maternity leave – as well as a housing fund for every employee. The combined levy, which adds up to over 30 per cent of an employee’s pay on top of the firm’s income tax requirements, is an especially heavy burden for smaller manufacturing and service firms.

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The burden is so heavy that many Chinese employers, especially in the private sector, try to avoid paying the contributions by either under-reporting salaries or by hiring workers on a temporary basis.

The coverage of unemployment insurance is also notoriously low in China, partly because of strict eligibility requirements. In April, China’s State Council asked local governments to broaden coverage of unemployment benefits, particularly to migrant workers who had paid into the system for less than a year.

In 2019, it was also the first year since 1990 that China’s payouts of unemployment benefits surpassed contributions, suggesting the overall employment situation had reached a critical point even before the impact of the pandemic.

What are the job prospects for China’s graduates?

In June 2020, China expanded the definition of “employed” for 8.7 million fresh college graduates to cover those who open online shops, play competitive online games or have blogs, as part of an effort to boost the employment rate amid the coronavirus pandemic.

And graduates who take freelance work, including in online marketing, managing public accounts on instant messaging platform WeChat, and playing esports, are now classified under “flexible employment”, which is counted in the overall employment figure.

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But the change in criteria fanned speculation that Beijing was trying to inflate employment figures for young graduates in a worsening job market.

Beijing started ranking higher education institutions by their graduate employment rates in the late 1990s. In 2004, the central government included flexible employment such as writers and freelance translators. The current graduate employment rate covers people employed by companies, start-ups, freelancers or those pursuing further education.

Hundreds of thousands of graduates, perhaps even millions, have also taken jobs as delivery riders – a sector that expanded rapidly as a result of the country’s strict lockdown measures to contain the coronavirus. A total of 24.7 per cent of industry-leading Meituan’s 2.95 million delivery riders had at least a bachelor’s degree at the end of July 2020, up from 18 per cent a year earlier.

Want to know more?

In every episode of the Inside China podcast, we take a deep-dive into a specific topic, mixing independent reporting and exclusive interviews to bring you unique insights into an emerging potential superpower. Now, we are featuring regular updates on the coronavirus pandemic from across the country.

Also, each week political economy journalist Finbarr Bermingham wraps up the latest developments in tariffs, diplomacy and economics from reporters and editors at the Post in the US-China trade war podcast.

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