Subhi Dani – Business Consultant
China’s Labor Market is one of the important factors which is contributing to the country’s economy and helping in development in the last couple of decades.
In the initial years, it was benefitting the country as it was cheap but now the economic growth is experiencing a slowdown due to many factors like change in the country’s demography and labor effectiveness.
With over 1.4 billion (as per 2019), China population ranks first in the world and estimated to be 1.41 billion by 2022. China’s population is aging at a high pace and, by the late 2020s, will unavoidably experience the downtrend for the size of the workforce in the coming decade as the working-age population is shrinking.
Hence it’s time to raise the productivity level for economic growth in the future.
With an increase in white-collar workers in the market, searching for a job using online platforms is becoming a new trend in China.
As things are going online, it is helping the industries and enterprises to maintain the growth and able to pick up their recruitment demand.
If we take a closer look at labor demand, growth in recruitment is mainly seen by new and emerging companies. E-Commerce, banking, finance, insurance, IT are the top-ranked sectors for recruitment demand.
On the other hand, traditional manufactures experienced overcapacity and cut down demand.
With the structural reform, the labor market for these companies will continue to contract from new and emerging industries.
In the early years of China, a strong political government gave importance to agriculture.
After implementing the economic growth schemes, during the 1990s and 2000s, more focus was given to industrial labor.
With transformation ongoing of the economy towards service-based companies, employment in this sector has been expanded over the past few years.
This led to better-salaried jobs in big cities which led to a migration of workers to those cities for a better salary and a better lifestyle.
According to the official’s data, around 288.4 million migrant workers were registered in 2018.
The increase in demand for qualified and trained workers fueled the urban market. The average salary was increased to almost 82K RMB by 2018.
Unemployment has been a critical issue in China in the last few years with an increase in population and with automation in the industries that led to lay off of employees.
The impact of FDI has increased since they implemented Open Door Policy as foreign-funded companies have also become a major source of demand for migrant workers which led to shortage of labor for domestic companies.
Demographic factors also have an impact on the unemployment in China (young people, middle-aged people, or elderly people).
As per the survey from CNN, almost 80 Million Chinese might already be unemployed due to COVID-19 and 9 Million more might lose the job in the next few months.
“The Covid-19 shock to the job market is unprecedented in its scale, length, and nature.” wrote Wei Yao and Michelle Lam in a research report (May 2020).
Labor costs in China continue to grow. As per the rules, local governments in China are required to update the minimum wages at least every few years. But they have flexibly to adjust as per local conditions.
Each province in China set the different minimum wages as per the development level and cost of living in that province. As per the government data currently, it varies from 1200 RMB in small cities like Liaoning to 2500 RMB in big cities like Shanghai.
With an increase in transitions to automation and innovations, most employees employed by foreign-invested companies earned above the minimum wage.
If we compare the other factors like productivity, facilities, infrastructure, logistic cost, China still emerged as a more cost-efficient option compared to other countries with lower labor costs.
For companies and individuals interested to know how much is the cost of employment in China, use our employment cost calculator to find out how much an employee cost in China and which parts by employer and employee.
The way we work is to keep on changing. New technologies, innovations, and automation that came into force in the last couple of years have had a significant impact on work. Employee comfort has become a key focus area for businesses, and employees as now demanding more flexibility.
Globalization in the market is affecting the way we work. It has already started influencing the availability of talent pool. Also, it started increasing the pressure to perform.
The young generation in China is now more university educated and has high career aspirations. They prefer white-collar jobs in different sectors like IT, consulting, e-commerce, education, media, and culture.
Employees of these sectors are feeling distressed as work-life balance is missing due to the 996 work schedule (9 AM to 9 PM, six days week).
Also, after COVID impact, companies have started deducting the variable components, slowing down the economy.
China has the largest manufacturing workforce in the world and ranked 1st on the list.
The workforce in developing countries is becoming better qualified and to a higher extent engaged in more sophisticated service-oriented activities.
Due to the one-child policy now we are experiencing a decline in the workforce in China as 20% of the country’s population crossed the retirement age.
China has also a unique restraint called the Hukou system which does not allow easy movement of labor across the country.
Residents in rural areas have to fulfill certain parameters to get an urban certificate. Nowadays, China’s second-tier cities are making efforts to attract young talents.
Other than that, China is now facing one more challenge, which is the decline of women’s participation in the workforce. Genders’ gap in pay has increased, leading to discrimination in the labor market.
The decline in childcare facilities has also forced many women to stay home to take care of their kids.
China’s labor market has improved over the past decade, but still, regional balance is not there. Labor law exists in China, which gives importance to:
- Protection of the legal rights and interests of workers to regulate the labor relations, to establish and safeguard the labor system;
- Labor policies that establish an employee representative system. This plays an important role in connecting the company and its management team with employees;
- Protection of the rights, personal dignity, right of rest;
- Policies that include notice entitlement (30 days notice period), holiday, family-friendly rights like maternity and parental leaves.