Unemployment in China: Economy, Human Resources and Labour Markets (review)

Unemployment in China is an important yet elusive topic. We may have many anecdotal stories to tell, but none provides a comprehensive and accurate description of the breadth and depth of the problem. By definition, the official unemployment statistics measure only a small subset of the population. Moreover, the economic reform started in 1978 has caused major industry and sector shifts, job mobility has risen significantly, and migration has become more common. All of these factors have made unemployment more difficult to measure. Furthermore, the main reason for unemployment is an elusive target for researchers and policy-makers alike; unemployment not only changes over time, but also varies across geographical locations. If the above problems are not solved, it is very difficult to discuss the issue any further.

However, the problem is so important that sometimes scholars have to work with whatever statistics they can find. With 1.3 billion Chinese, a change of a small fraction in unemployment could affect millions of people. Scholars from different specialties look at the statistics from different perspectives. Economists focus on the lost output, while sociologists emphasize societal changes. The successful transition of the labor force from an old and declining sector into a new and growing sector is not only important for economic development, it is also crucial for stabilizing society and shoring up support for further reform. Therefore, it is only appropriate to take a multidisciplinary approach to this problem.

Unemployment in China is a collection of eleven articles (excluding an introductory chapter and a concluding chapter) attempting to cover the topic from several important disciplinary angles. Unemployment first and foremost is an economic problem; therefore, it is only natural to start the discussion with two chapters on the macroeconomic assessment of the severity and historical patterns of unemployment problems in post-reform China.

In chapter 2, Webber and Zhu draw an interesting comparison between reforming China and nineteenth-century Europe. The common phenomenon is the emergence of a dominant group of commodity laborer. However, instead of depriving farmers of their land, Chinese proletariats are created by a joint force of markets and capital. Specifically, surplus laborers from the countryside are lured into the cities by higher wages, and such migration has become easier with the loosening of the household registration system. In the cities, the drastic downsizing of state-owned enterprises has caused millions of workers to lose their iron rice bowl and become free laborers. These two groups make up the majority of the unemployed people.

Hu and Sheng continue in chapter 3 with construction of accurate statistics. The official unemployment statistics measure only registered urban unemployment, which ignores several large groups of potential workers. First is the rural-urban migrant worker, estimated to 1.5 million unemployed workers in 2003. The number of urban laid-off workers from state-owned enterprises is 4.2 million. Jobless university graduates account for about 0.9 million. In summary, the real unemployment rate is 7.8 percent, rather than the officially reported 4.3 percent in the urban areas. These figures do not even take into account the pervasive underemployment in the countryside. Such underestimation became worse in the later period of 1997-1998, during which the official unemployment rate is just 3.1-3.3 percent while the real unemployment rate is as high as 9.0 percent. In 1997-1998, the loss of output due to unemployment is about 8.8-9.2 percent of gross domestic product. As a result, from 1997 to 2003, the number of people on the minimum-cost-of-living program rose sharply from 892,000 to a staggering 22.35 million. The number of labor disputes also multiplied during this period. When unemployment numbers climb, the problem quickly transforms from a purely economic concern into a social and maybe even a political concern. Creating jobs has become the new priority...