Structural Imbalance Leads to Unemployment Problems

Lin Chen， a former employee for a Holland-based company in Guangzhou， has been jobless for four months. During the four months， his feeling went through a great change. Nowadays， even though he keeps looking for any vacant positions on the website， he found it difficult to find a proper job.

“If your jobless situation sustains for another month， will you lower your requirements for salary？” When asked that question， Lin Chen seemed to be very hesitant. Slowly he answered： “I am not sure.”

Behind Lin Chens predicament are the massive lay-offs of foreign companies against the background of global economic recession. From the end of 2012 to the first half of 2013， Avon， Motorola， IBM， HSBC Life Insurance， Hewlett-Packard， Siemens and others cut thousands of jobs in China. The domestic leading enterprises also joined in the rank of firing people. Zoomlion and Sany were reported to reduce a number of employees in an indirect way.

With the influence of the global lay-off wave， the human resource market in China is facing the unemployment problem caused by the structural imbalance. On one hand， the emerging industries are in great need of highquality talents； on the other hand， the traditional industries are needing fewer and fewer workers.

The new Labor Act took effect as of July 1， 2013， which posed higher requirements for enterprises. Some companies had to reduce the employment in order to save the labor cost. Therefore， some companies believe that the employment situation might get worse in the future.

The Shattered“Golden Bowl”

Lin Chen used to work for a Holland-based shipyard. Like him， this industry also went through the change from top to the bottom.

“At that time， there were too many orders given to the shipyard to be completed in three years，” Lin Chen said. The “time” he talked about was the year of 2008， when his company was at its peak. It rented a property that covers 3，000 square meters and it turned into a new branch. In two years， the number of employees of the new branch increased from seven to 150.

However， the situation made a sudden turn from last year. The clients all canceled the orders of dredgers that had been given to the company. In order to reduce the cost， the company began to cut jobs. Soon the number of employees shrank to 40 and Lin Chen was also one of the 110 people that lost their jobs.

The depression in ship-making industry did not end at Lin Chens company. Even the giant shipyard Rong Sheng Heavy Industries was trapped in the labor disturbances in July. One of its senior executives said that Rong Sheng Heavy Industries plant in Nantong， Jiangsu is likely to reduce the current number of employees from 115 thousand to 8，000 as originally planned.

Foreign companies were also frequently heard about cutting jobs recently， including some foreign giants. This March， HSBC Life Insurance were said to have cut employees swiftly. Avon also said at the end of last year that its Chinese branch is going to close a dozen of subsidiary companies in China as a part of its global lay-off plans. About 100-200 employees were to be lain off.

IBM also joined in the rank of cutting jobs in China. Its plan of reducing spending of US$1 billion requires the global computing giant to fire 6，000-8，000 people in the world. In China， 500-600 IBM employees will be fired accounting for 10% of the total number of employees in China.

“Previously， the lay-offs in China mainly happened to the workers at the age of 40 or 50 when the state-owned enterprises where they worked for faced the problem of changing its ownership. That happened 20-30 years ago. In the recent two years， the past lay-off storms returned and targeted younger white collars， who worked for foreign enterprises and enjoyed high salaries. The‘Golden Bowl has been broken，” said Wang Shutong， CEO of Dunhuang.com in her blog. According to her， the HR department of Dunhuang.com received many more CVs of senior executives and experienced employees from foreign companies that were recommended by headhunters.

Several HR experts said that foreign enterprises and big state-owned enterprises all provided fewer vacant positions in these years. As a result， the“unemployment of white collars” has become an inevitable trend.

Guo Sheng， CEO of Zhaopin.com， said that there are three reasons for multinationals to cut jobs in China. Some of them did this as a part of its global strategic adjustment， such as Motorolas lay-offs after being acquired by Google. Some of them did not think highly of its future in China， such as some banks. The others used to see China as the manufacturing base but the increasing labor cost in this country forced them to move， like Adidas and Nike.

Apart from the direct lay-offs， some enterprises chose the indirect and disguised way to clean the company of extra employees.

Several workers from a well-known joint venture glass companies said that thy used to work on Saturday in the high season years ago. But from last year their working hours became very unstable. Sometimes they rested for 2 days after two-day work； and sometimes they made a four-day rest after working for three days. One of the employees said that he only went to work for 12 days in two months.

This “lay-offs in the form of holiday” is also widely used by the Top 4 accounting firms and other financial institutions in Hong Kong and New York. Employees are required to take a holiday with a low salary or even no salary to reduce the financial burden of these companies. Now， the method gained its popularity in China.

For example， 350 employees of Huarui Wind Energy were forced to take holidays at the end of last year. The company only paid each of them RMB 1080 per person for their basic living.

Guo Sheng said that the “forced holiday” was common in investment banks and consultancy banks that are extremely sensitive to the economic situation. But now even a company with substantial products has used that method， revealing how vulnerable the Chinese labor market is.

The Structural Unemployment

Actually， the problem of unemployment of white collars， as several experts point out， is not a new problem. It is just intensified in recent two years because of the worsening global economy. The long-term existence of white collars unemployment actually reflected the structural gap between the supply and demand of labor force in China.

Chen Jianhui， director of the HR Research Center at the Chinese Academy of HR Sciences， said that the massive unemployment of white collars is not only related with the bad international economic situation， but also a result of the adjustment to the Chinese economic structure.

The employment market is a mirror of the economic structure. Leng Ming， Vice President of Job1001.com said that the traditional industries are providing fewer job opportunities in these two years while emerging industries have a growing demand for hi-tech talents.

“In the fast growing IT industry， there will never be sufficient programmers and recruitment ads could be seen everywhere，” said Leng Ming. The situation was especially so at the end of 2011， when the mobile Internet was a hot topic. People with wonderful APP development skills are usually given three or four choices.

In comparison， the supporting staff found that they are less and less popular in the market. For example， the positions of clericals and customer service advisors in various industries are indeed stuffed in recent years. “If a state-owned enterprise wants a clerical， thousands of people would like to deliver their resumes for a shot，” Leng Ming said.

Foreign companies also started with the support staff when they decided to cut jobs. For these people with technological skills， they could easily find jobs again after losing the previous job. But the clericals and customer service advisors may not be that lucky.

According to Chen Jianhui， there is a great demand for the marketing staff in Beijing， Shanghai and Guangzhou. In the first- and second-tier cities of China， people having skills related with urban railways are very popular. In comparison， the market also has a great demand for talents with skills of animation design， foreign language， computing and biotech， but the supply is so big that it is not easy for anyone to find a proper job.

The change of economic structure in China has placed the service industries under heavier and heavier scrutiny， said Guo Sheng. The number of jobs offered by the industries of finance， Internet and high-end manufacturing increased by 20% to 30% every year， while the simple processing and manufacturing industries could only provide 10%-15% more jobs each year.

In addition， Guo Sheng said that the imbalance of employment among regions and enterprises is also very easy to see. Many people stay in Beijing， Shanghai， Guangzhou and other developed cities and refused to go to thirdand fourth-tier cities even though they can get better working opportunities there. In addition， people would like to work for state-owned enterprises or foreign companies instead of small companies which have the largest demand for employees. These all lead to the imbalanced distribution of talents.

Zhaopin.com once made a research into the employment situation in Brazil and found that Brazilians are more willing to work for small- and medium-sized enterprises （SMEs）. Thats because they think that these enterprises can provide better development opportunities and better welfares. But it is more likely a result from the better social welfare and security system in that country. Every enterprise strictly follows rules to buy endowment insurance， unemployment insurance and medical insurance， as well as housing funds， for their employees.

In China， things are not like this. SMEs are notorious for not giving a complete social security system for employees while big state-owned enterprises and foreign companies can provide better treatment for talents.

Chen Jianhui said that the unemployment exists in every country. The jobless talents， especially those fired by foreign companies， can still find jobs if they do not have high requirements for salaries or treatment.

Guo Sheng pointed out that a few people have already decided to leave developed cities and go to lesser cities for better opportunities. “The number is small， but it is increasing slowly.”

As for Lin Chen， he stopped boasting in the QQ with his classmates and began to study a book about management. He also picked up his English again. In his last interview， he found that his poor English skill has been a problem for him to find a good job.

“Stagnant” Lay-offs

Apart from the structural imbalance and the economic recession， the macro economic policies are also to blame for the unemployment of white collars.

Prof. Feng Tongqing at the China Academy of Labor Relations said that the change of Labor Act forced many state-owned enterprises and foreign enterprises to lay off their temporary workers in order to save the labor cost.

Previously， the state-owned enterprises implemented two kinds of employment contracts inside them. The first one is called “formal employment”as employees got contracts following the national law and enjoy every benefit they deserve or the companies give. The second is called “temporary employ- ment” as employees get no or incomplete employment contracts from employers and could not enjoy the salaries and benefits they deserve， even though they do much more and better jobs than“formal employees”. Thats an important reason to cause the social inequality in China.

The new Labor Act targets this inequality. But it may get unexpected result as those enterprises will fire those“temporary workers”， rendering them completely jobless.

“Even though these enterprises have the will to turn ‘temporary employees into ‘formal employees， they are restricted by the downward economic situation and do not have enough power to do this，” said Prof. Feng Tongqing.

In his opinion， the new Labor Act seems to protect laborers. But when the general situation does not turn to the better condition for ordinary laborers， the Act could damage them instead of protecting them.

In Feng Tongqings opinion， the best way to solve the unemployment problems lies with the SMEs. They are in trouble at this moment and are transiting themselves along with the industrial upgrade. The government should provide more financial support for them， such as favorable taxation conditions and easier access to loans.

Some experts said that some companies， especially foreign companies， are still watching. They are expecting a better economic situation. But if things do not go as they wish， they might be forced to cut more jobs.

Wu Jiang， Dean of the Chinese Academy of HR Sciences， thought lowly of the future employment situation in the next few years. He said that the government is going to add 9 million new posts this year， but there are about 7 million new college graduates wanting to be fed. Since the Chinese economy is still changing， there will be quite few new posts added in China in the future.