China needs effective investment in human capital

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THE labor market in China has remained stable in recent years, with more than 13 million new urban jobs created each year from 2013 to 2019.

However, some structural problems such as disparities between urban and rural areas, different regions and different industries, youth employment and the quality of labor supply, have emerged.

The skill set of the rural workforce often falls short of the demands of modern industry, while basic public services in cities can hardly keep up with the growing demand as millions of migrant workers become city dwellers.

When it comes to regional imbalance, China’s interior regions have a comparative advantage over coastal regions, as labor costs rise in the latter. It resulted in a wave of industrial transfers from the coastal regions of the southeast to the interior regions of the center and the west, which changed the old structure of labor supply.

But groups of young people, such as university graduates and young migrant workers, face strong employment pressures as their professional skills do not match the demands of the changing labor market. So even though the number of university graduates has reached record levels in recent years, they face increasing pressures while seeking employment and companies are plagued by a constant shortage of manpower.

The aging population and declining fertility rate will further exacerbate labor supply problems in China, as the labor force participation rate in working-age groups will decline. According to the experience of developed countries, it could drop to less than 50% in the post-industrial era.

It is predicted that from 2020 to 2030, China’s working-age population will increase from 989 million to 963 million, with the participation rate rising from 68.44% to 65.17%. As a result, China’s labor supply will decline to 627 million by 2030.

In this context, it becomes imperative to cultivate the quality dividend of the Chinese workforce through effective investment in human capital.

The economic slowdown caused by the novel coronavirus outbreak will also slow the creation of new jobs, although the job size will continue to increase. Since its opening, China has enjoyed a long period of rapid economic growth. The number of new jobs created for every 1% increase in GDP growth increases as the economic aggregate increases, meaning the number of new jobs created for every 1% increase in GDP growth in 2019 was much higher than in 2009.

Therefore, the economic slowdown does not mean a sharp decline in employment opportunities. As the economic aggregate and market size expand and the industrial structure diversifies, the demand for labor continues to grow in China.

Technological advancement is another game changer, having a “replacement effect”, in which new technology replaces the jobs of some people. However, it will also have a “creation effect”, with improved productivity and the expansion of new products creating new employment opportunities. As long as the number of new jobs created exceeds the number of those lost, the problem of mass unemployment will not arise.

The demand for labor depends on the economic growth, capital and technological endowments, and industrial structure of a country. It is estimated that from 2020 to 2030, the demand for labor in primary industry will increase from 187 million to 109 million and the demand for secondary industry will increase from 200 million to 160 million. Demand from the tertiary sector will, however, drop from 380 million to 490 million. Globally, the total demand for labor will reach 760 million in 2030.

In the future, China should continuously strengthen labor market reform in order to improve the development and efficiency of human resource allocation with the aim of achieving high-quality employment and full employment.

First, China should expand the scale of labor supply and increase the labor force participation rate. It could unveil policies of postponing the retirement age to cushion the impact of the rapidly aging population on the labor market and encourage people to have more children to cope with the short and long impacts. end of the decline in the fertility rate. In the meantime, the social security system and child support policies should be improved to ease the burden on a working-age person to support a family as the total dependency ratio increases. increases.

Second, structural barriers such as gender and regional discrimination in the labor market should be reduced. China should harness the potential of women, study the characteristics of different employment groups and promote equal employment opportunities. In addition, basic public services for employed people and business start-ups should be improved to promote the employment of key groups, including university graduates and migrant workers, by reducing their job search costs and institutional barriers.

Third, China should further promote the flow of labor between urban and rural areas. On the one hand, China should guarantee the fundamental rights and interests of migrant workers, accelerate the reform of the household registration system, or hukou, in metropolitan areas, urban agglomerations and megalopolises, promote the equalization of services basic public services in cities and increase the capacity of services, such as children’s education, medical services, social insurance and housing, to encourage them to settle in the cities where they work.

On the other hand, in addition to their transformation from farmers to city dwellers, China should promote the transformation of migrant workers into modern industrial workers by further increasing their professional skills to meet the new demands of industrialization.

Finally, the structure of the human capital supply must be optimized to increase the quality of work in China. To solve the structural problem of the Chinese labor market, in addition to increasing support for higher education, China should increase investment in preschool, basic and vocational education, accelerate reform of the technical secondary schools and higher education curriculum and better match labor market supply and demand through demand-driven education such as joint school-company training and strategies of company personalization. – Chinese Daily / ANN

Qian Cheng is an associate researcher at the State Council Development Research Center. The opinions expressed here are the

own of the writer.


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