From JCapital’s Anne Stevenson-Yang via FTAlphaville:
The reality of employment in China is that no one actually counts it, and the popular idea that the Chinese nomenklatura worries day in and day out about creating jobs is simply false. Employment in China is about social security with an emphasis on “security,” Communist style.
For the Chinese bureaucracy, the general population is not so much employed or unemployed as inside or outside the system. People outside the system are a security concern, not an economic concern, because, without the supervisory role of a State-owned employer there is no one keeping tabs on people to make sure they do not join a protest, have an extra child, leave home and create an urban slum in another locality, or, God forbid, go to the capital to seek redress for something, thus bringing political ire raining down on the hometown authorities.
…Historically, the way “new jobs” are created was by mandating State-owned firms to take on a certain number of people, essentially making social security payments, which then may be either dispensed directly by the SOE as a “stay home and get paid” program or used by a given locality to support the unemployed if needed, and this pattern has reemerged in these times of economic stress.
Back in the fat days of 15% nominal growth, authorities did not need to concern themselves much with creating jobs; unemployed people would soon enough find an income someplace in the gray or private economy. Now, as the economy nosedives and options contract, the focus on employment as a surveillance tool will hurt China economically. At best, the reaction to a weakening employment picture will be to push jobs toward the State sector and increasingly undermine private industry. Inevitably, it will continue the stall in productivity growth that has emerged over the last two years.
…It is not surprising, given the number of bureaucracies allegedly reporting employment numbers and their various incentives to count one way or another, that numbers from different series don’t match. For example, in the economically challenging year of 2008, MOHRSS announced that 9.36 million jobs had been created in the first three quarters. But statistics from those quarters show a net addition of 3.2 mln jobs. The growth in the statistic showing the number of unemployed people shows much more volatility than does the unemployment rate, going from negative 2% to positive 11% growth in various quarters, and yet the range in the unemployment rate is only 4.0 to 4.2%. Overall, the unemployment rate has been essentially unchanged, at 4%, since 2003, when China began publishing the statistic. Likewise, the series on the number of people seeking jobs is highly volatile, with annual growth ranging from negative 14% to 104% in some quarters. The wage growth shown for migrant workers from different series by the same ministry is very different. And so on. This is all against the demographics, which should indicate a decline in the number of employable people as more Chinese enter the uncounted age levels.
…What is entirely missing from the Chinese system is a means of targeting high-level economic goals rather than ministry-driven bureaucratic targets. The intertwined interests of the Party, the State-owned enterprises, and the administrative bureaucracies account for the stubborn classification of economic activity as State-owned, Private, and Foreign Invested. Of much less interest are key economic measures more familiar in mature economies, such as productivity gains and employment.
Employment, under employment, and unemployment remain inherently difficult to measure in China’s vast, hybridized economy, in which a remarkable number of urban and rural residences devise ways to generate cash flow, with or without actual reported jobs. And as long as the emphasis in social security administration is on “security,” incentives to develop an accurate picture of employment will remain weak. Different bureaucracies are charged with keeping people off the streets, supplying social security benefits, and keeping tabs on workers, but no one has a full-employment portfolio, nor does the bureaucracy have the tools to know when unemployment has become a serious economic problem. Exporters to and investors in China will know sooner than General Secretary Xi Jinping when the Chinese people have little money left to spend. In this way, China’s government is becoming trapped within its own good news machine.
