WHILE THE WEST INCREASES UNEMPLOYMENT, CHINA HAS TOO MANY JOBS

Help wanted – China struggles to fill jobs

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At the Tiger Lane Bridge recruitment centre in Beijing, a handful of men scan a board plastered with job ads. Waiters, cooks, teachers, security guards, welders, telephone operators and drivers are all in demand.

But the job seekers, – who are outnumbered roughly ten-to-one by the positions advertised – are in no great rush.

“Actually, I’ve got a job already. I just come here every now and again to see if I can find a job that pays better,” says Mr Liu, 40, a migrant from nearby Hebei province.

Mr Liu, who earns Rmb2000 ($314) a month, was upset when he did not get a 15 per cent pay raise this year – an annual increase that has become the norm for blue-collar workers in China.

The Chinese economy has been slowing – data due this weekend are expected to reveal that exports, investment and industrial production were all weak in May – but the labour market remains very tight.

From Beijing in north China to the southern manufacturing province of Guangdong, the main concern of workers is not finding jobs, but securing higher pay. In fact, companies say they are struggling to find and retain staff.

For the government, this is a significant argument against launching large-scale economic stimulus, as there is no need for a major spending boost to create jobs.

The central bank’s move to cut interest rates this week shows that Beijing is worried about slowing growth. But officials stress that there will no repeat of the massive stimulus package unveiled in late 2008 during the global financial crisis.

While Europe and the US struggle with rising unemployment, China’s labour problem is the opposite: it experienced a record shortfall of workers in the first quarter. The human resources ministry says that for every 108 employees sought by companies, only 100 people were looking for jobs – equating to a nationwide deficit of nearly 1m workers.

The reason China’s job market is tightening when the economy is slowing is simple: demographics.

The government introduced its one-child policy just over three decades ago to limit explosive population growth. Since then birth rates have declined steadily, with the proportion of the working-age population expanding at a slower rate in recent years. UBS estimates that China’s workforce will peak in about 2015, and then start to shrink.

At Polaris Jewellery in Guangzhou, Guangdong’s capital, the factory manager worries that China’s tight labour market will destroy the company’s apprentice programme, as young workers are no longer willing to commit to the two years of training.

Lee Hin-shing, who manages the factory of 440 workers, says the floor that used to house trainees is empty. Polaris has just one trainee, down from a couple of hundred more than a decade ago. “No one wants to join the industry,” he says ruefully. “In 2004 and 2005, we had more than 800 workers.”

This demographic landscape is likely to get worse. China’s ratio of workers to retirees is likely to “drop precipitously” from roughly 5:1 today to 2:1 in 2030, according to Wang Feng, director of the Brookings-Tsinghua Center in Beijing.

But while demographics are extremely powerful, if economic growth were to collapse, for example, unemployment in China would inevitably rise – and potentially quite sharply.

When the global financial crisis savaged the Chinese export sector in late 2008, more than 20m blue-collar workers lost their jobs virtually overnight. Concerns about social instability prompted the government to roll out a Rmb4tn mega-stimulus package, which helped propel the country back to double-digit growth.

Unemployment is considered to be a “lagging indicator”, meaning, an economic slowdown today may only lead to job losses a few months down the road.

There are, in fact, a couple of warning signs. Almost 8 per cent of respondents to a HSBC survey of the Chinese manufacturing sector said they cut jobs last month. The overall decline was modest, but it was also the steepest fall in 38 months, stemming from a decline in new orders. Moreover, the export sector is once again suffering sluggish growth, a bad omen for the employment situation.

But for the time being, job seekers are still spoiled for choice. At a leather factory in Dongguan, a manufacturing hub in Guangdong province, the owner David Liu says workers used to queue outside the factory and ask their friends for contacts.

“Now the factory owners are asking acquaintances for help recruiting workers,” says Mr Liu.