Talent Management Column You Think Things Are Bad Here?

While the job market in the United States is extremely difficult for newly minted college graduates, the situation in China is even worse.

Monday, June 16, 2014
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The great conundrum of the U.S. college labor market is that employers say they are struggling to hire the people they need -- workers with the right job experience -- while smart college graduates can't find anyone who will give them experience. Still, they are better off than new high school grads because they can take the jobs the high school grads would have gotten, "bumping" the latter into unemployment as a result. That is why the unemployment rate for even new college grads is about half the rate of new high school grads.

I recently spent a week in China, where the growth rate of the economy is 7.5 percent, about three times greater than what we see in the U.S., and everyone is concerned about the fact that it has slowed down from the typical level of 9 percent. Despite that growth rate, the job market is not great for college grads and actually seems to be considerably worse the more education one has. School leavers from secondary school seem to be able to find jobs, but the unemployment rate for new college grads is a stunning 35 percent! How depressing to be in a hot economy and yet still have awful job prospects. I'm told the worst job prospects in the labor market are for Ph.D. graduates.

Why is this? One hypothesis is that with greater wealth in the society, more parents want their kids to go to college, so more of them are being sent. That includes some who probably shouldn't go at all, so maybe the quality of graduates isn't as good on average as in the past. There seems to be a change in expectations when they graduate from college, along with a reluctance to step down and take the high-school jobs that their peers in the U.S. are taking.

The best explanation seems to be supply and demand. The Chinese also value education for its own sake, so many kids go onto college without thinking very much about whether there will be a job for them when they are finished. There apparently are just too many kids graduating to fill the number of managerial jobs available. It's a story about the disconnect between aspirations - my child needs to have a college degree and to be a manager - and reality.

What kind of jobs do college grads in China want? I spent a day at Peking University, arguably the best school in the country. The students there told me the No. 1 job for them is working for the government. Why? Despite the fact that it doesn't pay nearly as well as the private sector, it's prestigious and it's also a stable job with a future. The No. 2 choice is to work for a state-run enterprise. Picture this as something like a nationalized industry. Stability is the explanation for this as well. No. 3 is the red-hot Chinese private sector, which we would have thought would be the place to make money; but it is also somewhat risky.

And last on this list? Working for U.S. companies.

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Why? The perception is that those companies "chew you up and spit you out" - no stability and no long-term career.   

So what are the jobs like for college grads? The bad news: They pay about $1,000 per month. The monthly rent for even a small apartment anywhere near the center of Beijing is more than that. They aren't getting rich. On the other hand, they get several things that U.S. grads couldn't dream of getting. One is about 45 days of vacation per year. A second is an employment contract, typically about three years. During that period, the employer will not lay you off, and it is difficult to fire you. But you can quit. And the third is training.

On balance that sounds pretty good. Now, if they could only get a job.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book is Why Good People Can't Get Jobs: The Skills Gap and What Companies Can Do About It.


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