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College Graduates: Too Many in China, Not Enough in America?
By EconMatters
"They share every similarity with ants. They live in colonies in cramped areas. They're intelligent and hardworking, yet anonymous and underpaid." ~ Lian Si, Author of “Ant Tribe”
"Ant Tribes", a term coined by sociologist Lian Si, a professor who wrote a book with that title in 2009, broadly describes China’s post-80s generation of "low-income college graduates who live together in communities with poor living standards.”
These youngsters in China are well educated, many with science, engineering and finance degrees. From China Daily:
“A survey in [Lian Si’s sequel] “Ant Tribe II” found nearly 30% of "ants" are graduates of prestigious universities - almost triple last year's proportion. Most had degrees in popular majors, such as medicine, engineering, economics and management….In addition, 7.2% of "ants" have at least a master's degree compared to 1.6% in 2009. An "ant's" average monthly salary is 1,904 yuan ($286), with about 64% of them earning fewer than 2,000 yuan a month.”
There are more than 1 million "ants" live in big cities, about 46% spend more than they earn, and 80% have no savings, according to another survey in the 2010 Annual Report on the Development of Chinese Talent, released by the Social Sciences Academic Press in June.
China - 10% Jobless Rate Among College Grads
In June, Xinhua reported that the employment rate of college graduates in China was 89.6% in 2010, about 2% higher than that in 2007, according to a survey by education research company MyCOS Institute.
Separately, China Daily reported that the employment rate among college graduates in 2010 increased by 4.2% year-on-year with 72.2%, or 4.56 million of all graduates in 2010 found jobs as of July 1 last year, based on statistics released by the Ministry of Education.
That suggests around 30%, or 1.76 million, of new college grads in China can't find a job, while the unemployment rate for college graduates is around 10%, which is much higher than the 4.1% average urban jobless rate in China.
And it’s only going to get worse.
China - 7 Million New Grads A Year
The Ministry of Human Resources and Social Security indicated that China will have about 6.6 million college graduates in 2011, vs. 6.3 million in 2010, and acknowledge that the employment situation facing them will be tough.
What’s compounding the issue of the sheer number college graduates en masse is the fact that many graduates' expectations for jobs do not match market demands, according to a statement from a State Council meeting on May 25.
China’s Problem – Oversupplied & Mismatched
Indeed, China is the largest developing country in the world far from being fully industrialized, and lacks the necessary infrastructure to properly place these highly educated young people.
The nation owes much of its GDP (and therefore new jobs) to the manufacturing, industrial, and exporting sector, which mostly have more openings for blue collar workers instead of white collar jobs. There are simply more of them than jobs that they are qualified for, and the lack of affordable housing also has contributed to the “Ant Tribes” formation.
Furthermore, due to the imbalance of social and economic development between urban and rural areas, ‘’Ant Tribes’ are clustered around major coastal regions like Beijing, Shanghai and Guangzhou, whereas rural areas, especially in the western regions, where work environment can be difficult, have a much higher demand for college graduates.
U.S. – 20 Million More College Grads by 2025?
While China seems to have an over-supply of college grads, the United States, on the other hand, is not producing enough college-educated workers to meet economic needs and reduce income inequality, at least according to a new study --“The Undereducated American”--released by Georgetown University Center on Education in June.
The study finds that currently, the number of college-education Americans is growing by just 1% a year, and the nation has been producing too few college-educated workers for more than three decades (See Chart).
If the U.S. is to make up for lost ground and respond to future economic requirements, the report says the rate of new educated workers needs to go up 2.6% a year, adding 20 million college-educated workers, includes 15 million new Bachelor’s degree holders to the economy by 2025. That will boost GDP by $500 billion adding over $100 billion in additional tax revenues.
China – Economic Growth & Urbanization
In China, there’s a central belief of associating education with social and economic status which is ingrained in the Chinese culture dating back even before Confucius. That partly explains the current oversupply of college graduates and “Ant Tribes” as parents sacrifice almost everything just to put their kids through college in pursuit of a better future, and this is unlikely to change in the foreseeable future.
To absorb those graduates, China would have to maintain around 7-8% annual GDP growth rate, diversify its economy into high tech, financial and services oriented, and make a philosophical change to the entire education system based on quality vs. quantity.
Judging from various projections, this growth rate most likely is sustainable; nevertheless, to fundamentally diversify and revamp the economic and educational structure could be an uphill battle and would take decades.
For now, the central government has indicated it will prioritize the creation of jobs for college grads, and aims to create work through loans, subsidies, policies. Ultimately, infrastructure and housing will be built in China, and “Ant Tribes” would eventually dissipate with the expected mass urbanization to take place in the next two to three decades.
China - Beware of Frustration & Revolution
In the medium term; however, since patience is not one of the virtues of the young, Ant Tribes and soon-to-be Ant Tribes are likely to become more and more frustrated. Historically, many riots and revolutions have started when young people (particularly in packs) become frustrated.
There are reports of rioting already taking place in some “Ant Tribe” areas. This is probably a greater risk to the country’s stability before its economy could catch up with more suitable jobs.
U.S. – College Degree, But No College Job
In the U.S., the persistently high unemployment rate also presents new college grads with a similarly bleak job outlook as their peers in China.
In May 2011, NYT reported that both employment rates and starting salaries for new college graduates in the U.S. have fallen sharply in the last two years. In 2009, 22.4% of all college grads had no job, and only about half of the jobs landed by these new graduates even require a college degree (See Chart).
U.S. Boomer's Great Job Gap
Some expect the situation to reverse soon with the first baby boomer turning 65 on Jan. 1, 2011 as retiring boomers will leave a huge number of job vacancies. One study by Northeastern University projects that by 2018, there will be 14.6 million new nonfarm payroll jobs, but only be about 9.6 million workers available to fill those positions, leaving a gap of more than 5 million jobs.
U.S. - Skilled & Experienced Labor Shortage
However, the problem is new college grads most likely do not have the required skills, qualifications and experience to fill the job vacancies left by boomers. So I personally see a shortage of experienced and skilled labor, which does not necessarily mean a shortage of new college graduates.
Moreover, many boomers will likely work long past the expected retirement age partly to recoup the lost retirement savings during the Great Recession, which could delay the timeline of the "Great Job Gap".
From that perspective and given the economic outlook of the U.S., I believe there could also be a somewhat oversupply of college graduates, at least in the short-term, and a job and experience mismatch in the U.S., particularly in the experienced professional category, as companies act in haste coping with the Boomer's "Silver Tsunami", and sometimes end up replacing boomers with less qualified personnel.
U.S. - College Grads Employment & Pay Under Pressure
Currently, the unemployment rate among people with a bachelor degree or higher is at around 4.5% as of May, 2011, much lower than the U.S. national average of 9.1%. Overall, college graduates do enjoy higher earnings than their less-educated peers.
However, based on the current U.S. labor market condition, the employment and pay level in this demographic class would be under pressure in the next few years as new college graduates flood the market in a down cycle of the economy.
This labor and demographic shift could pose a long term risk to the U.S. as it could diminish the country's overall competitiveness.
Managing Demographic Dynamics
Needless to say, the college graduate cohorts present two similar yet distinctive demographic and economic puzzles to the top two economies in the world.
Both countries have some systematic supply/demand mismatch between geography, job openings, education level and skill set, which, if not properly managed, could turn out to be a much greater risk than most people realize.
Meanwhile, in the short to medium term, some U.S. companies will still continue to move operations (and jobs) to China to be close to customers and to take advantage of the large skilled labor pool with relatively lower pay scale. But at the same time, there would also be more Chinese companies expanding into the U.S. region bringing new jobs as China's private business sectors become more mature and sophisticated.
Long term, it is up to Washington and Beijing to properly set policies to incentivize businesses, education and social systems, given each country's makeup of the workforce, to have enough resource and job growth in place to match the future direction of their demographic dynamics.
Otherwise, we could see Ant Tribes--The American Style, and/or a Xinhai Revolution 2.0 in China in the not too distant future.
Further Reading - 90 Years of Communist China
(Celebrating Independence Day - Animated 4th of July fireworks at our blog!)
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Pity those who went into debt to get that college degree, only to find there are no jobs that will pay a decent wage to allow them to ever be able to repay the debt.
I have my Ph D in engineering from a top 20 college. It took me 4.5 years to find a stable job. It is just bullshit that we lack college graduates. More propaganda to bring over Asian slaves into our job market.
I got a lowly BS degree in engineering 15 years ago and never did get a job in my field. I gave up. I don't recommend engineering to anyone. I only recommend jobs where you are protected from foreigners undercutting your wages. I will admit, however, all that educashun helps with the Captchas.
What? Engineering is one of the only fields that has a very high placement rate at good salaries. What the hell are you talking about? Unless you are talking about an IT 'engineering' degree, that's ridiculous.
After watching my father build freeways as an engineer for Caltrans in the 60's I had the good sense to get the degree in Civil and then become a photojournalist. Never worked a day as an engineer, never regretted it.
Engineers, unfortunately, get F over. They may get decent pay for a while but they are over the hill at 40 unless they go into management or start their own business. There is constant wage pressure from $25 K a year HB1s from India et al who write spaghetti software code or whatever.
Maybe petroleum engineering or chemical engineering are better.
Uh, my degree is in ChemE. I recently saw this career on a Yahoo top ten list. That is top ten in decline. I couldn't get a job as an engineer, but I was working for them and I realized my mom was making more money as a postal worker. Then it hit the fan for all of us when the semiconductor plant moved operations to China. The engineers were the second people to go, right after the safety people. I learned though. I got me a government job. So I guess the education helped me realize when to cut bait and how to solve the Captchas. Two items=$40,000.
High placement rates? High salaries for engineers? You're on fucking crack dude. The salary disclosure for the City I live in just came out -- firefighters and bus drivers earn more than senior engineers. Human resource clerks earn more than a gentleman, a professional engineer, with 30+ years of managing the water treatment plant.
I honestly have no clue what you are talking about. I think you don't either.
I junked you since you obviously lack basic reading comprehension. See above.
plus, whatever. Couldn't agree more. We need the industry and the employment opportunities for the graduates we have, and a complete cut-off on that crazy foreign technical worker visa; how about America for Americans? I worked in Silicon Valley in the early sixties; people were headhunting me, come here, go there, we'll pay more; since then; blehh. Forget it. Everyone has the same experience; forget it; if we really need somebody we'll import them from India. It needs to change.
+1
Conflict of interest so egregiously displayed, Georgetown's accreditation as an "educational" institution should be pulled.
I think we lack the obsessively focused, supergenius hardworking cheap college graduates that businesses are looking for. There are plenty of graduates without the appropriate skills
We are becoming more like India where people are afraid to get a non practical degree. However reality slapping young people in the face who didn't adjust in time will be quite painful
Those would the Chinese at UCLA and USC
Are you fucking serious?
I don't think that's true at all. Half the graduates have a soft science, language arts, or ethnic/gender studies degree
.
+1 Our Immigration (Screening Dept.) does such a Great screening job. REF; DSK's Maid. (sarc off.
I don't know what you're complaining about. If she was a honeypot for Mr. Kahn, she did that job perfectly. She also displayed great dedication to her official job in cleaning the other room after the incident.
Yet American college/university grads don't even get the 'time of day' when they apply to employers, especially in the technology sector. Employment rates for EE, CS, IT grads out of top universities such as UC Berkeley and Cornell are only in the 30-40% range. This is definitely inconsistent with the claim that America is short college graduates.
The claim that there are not enough university graduates in the United States is just ludicrous. It will take many years, if decades to clear out the backlog of unemployed/underemployed grads from this decade, nevermind the new supply that keeps streaming into the market.
The claim that America doesn't have enough college graduates is idiotic.
This is statistical analysis worthy of the short bus.
The problem at its most basic is there are simply not enough jobs in america.Most low paying jobs are held by illegal immigrants,many from Mexico or S.America. The lower middle class fights for these jobs in a collapsing wage spiral that has already stripped away benefits like vacations, paid holidays off and health insurance.
The middle class jobs are outsourced to cheaper labor countries.
The upper class professional jobs are being outsourced or performed by h1-b visa holders.
Capital is international and poverty is local.
Free markets are too expensive since they are supported on the backs of the poor and slave labor. The future is becoming our feudal past.
Protectionism is the next logical step, raise the bar for foreign imports and preserve our dying industries. Free trade merely ensures global poverty is distributed globally.
Sounds like we need more H1B visas. You know, since there aren't enough American workers 'willing' to do the job.
/sarc.
Yeah we need a "beat the shit out of your nearest H1-B day!". Goddamn scabs.
This statement tells me everything I need to know about you.
You think H1Bs are scabs? Which union are you in?
There used to be a time when immigrants were welcomed to the "free world", prior to the onset of fascism, which you seem all too willing to accept. Do you think hating immigrants will stop them from "taking your jobs"?
Ever heard of The New Colossus? That's what built America.
What are you doing here?
Immigrants (which has nothing to do with H1B workers) ARE welcomed by the hundreds of thousands per year into the US, legally. That doesn't mean the entire fucking world can simply show up with a duffel bag and set up tent stakes.
Cornholing US workers by violating visa rules. The H1B is there to provide TEMPORARY manpower help at the professional level where there is no availability from citizens or lawful permanent residents.
And "no availabilty" should really mean, employers are paying people $1M/year+ (like some lawyers and bankers are paid), and doing everything humanly possible to improve the productivity of the existing workforce, before foreigners are allowed to be brought in as temporary workers.
I mean, this is what's done for employees in the financial sector who are deemed to be scarce. Why not all the other sectors where employers claim scarcity?
All I know is that I came to the UK on their equivalent of an intracompany transfer/H1B. It served UK government well, as they got 50% of everything. I was able to apply my skill to improve the environment I worked at. And best of all, I was able to plant a flag outside of the US.
Protectionism in anything is just that: protectionism. You either compete or you don't. You have the opportunity to emigrate as well.