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China’s Youth Unemployment Problem

New record-breaking figures for joblessness among workers aged 16 to 24 weaken the Chinese economy's near- and long-term prospects. If the trend persists, as seems likely, China will have an even harder time supporting its rapidly aging population.

CHICAGO – This month, China released official statistics showing that its unemployment rate for young people (16-24 years old) reached a record high of 20.4% in April. Worse, the news comes just one month before another 11.6 million students will graduate from college and vocational schools and enter the job market.

True, the lockdowns under the government’s zero-COVID policy were much more draconian and economically damaging than other countries’ containment policies, and they were enforced for more than a year longer in most cases. So, it is not surprising that China’s economic recovery has lagged others. For comparison, the US youth unemployment rate hit 14.85% at its pandemic peak in 2020, before declining to 9.57% in 2021, and to 6.5% today.

But while most of China’s pandemic-related obstacles to employment have been lifted, the fundamental conditions for reducing China’s youth unemployment are not improving. While the long-run post-pandemic jobless rate will be lower than it is now, it is still likely to remain higher compared to the pre-pandemic years. There are many reasons for this, but one key issue is the large gap between the “reservation wage” rate that young graduates are willing to accept and the rate that firms are willing to pay.