Steeled for Change

By Ji Jing & Yu Shujun

Chinese microblogger Duomaguo explains why he decided to quit the state-owned Wuhan Iron and Steel （Group） Corp. （WISCO）， a job known as an “iron rice bowl” - a secure job in a state-owned company.

“Because its not an ‘iron rice bowl any more. The steel industry is undergoing drastic changes and WISCO is no exception，” Duomaguo blogged.

Duomaguo， who has found a new job at an emigration company， is considered lucky. The likelihood of layoffs is hanging like the sword of Damocles over millions of workers as China seeks to slash overcapacity in traditional industries and shift its growth engine from investment to domestic consumption， services and innovation.

The Chinese Government announced in February that an estimated 1.8 million workers from the coal and steel sectors would be relocated to address overcapacity.

In March， Ma Guoqiang， President of WISCO， told Peoples Daily the companys steelmaking business would need only 30，000 employees if the de-capacity reform goes through. WISCO currently has 80，000 employees.

However， Sun Jin， Director of WISCOs Publicity Department， said it doesnt mean the 50，000 workers would be axed. “If a newspaper finds there are too many reporters and dispatches some to do proofreading or part-time distribution and continues to pay their social insurance and living subsidies， can it be said it has laid off its reporters？” Sun said.

Even so， resettling millions of workers still poses a challenge for the government， as it directly affects the interests of the workers， the implementation of supplyside structural reform， and overall social stability. Though the process may not be smooth， the government is determined to tackle the issue to minimize the impact on workers families and society.

A fund of 100 billion yuan （$15.4 billion） has been allocated for the relocation and Premier Li Keqiang said in March it could be increased if necessary.

Industrial evolution

“The latest [reform] plan is not a sign that China is about to be swamped by a wave of unemployed workers，”wrote Ernan Cui， an analyst at financial services company Gavekal Dragonomics.

In a note published on March 10， Cui said， “Chinas job market has been adjusting to the end of the housing boom for two years already， and while this adjustment is hardly pleasant， it is also manageable.” The loss of 1.8 million more workers was “less a radical departure than the evolution of an existing trend.”

Philip Moscoso， professor at the IESE Business School in Spain， said， “The good thing is that the government has recognized the problem.”

Moscoso explained that China is undergoing a trend that has happened in most other countries as well. “You have an economy that starts to develop and at some point you move from a more heavy industrial base output to [an economy which is] more value-added， hi-tech， knowledge-intensive， and heading toward more service-based business，” he said. “If you put it in the overall picture， thats a natural thing.”

According to Lin Yueqin， Director of International Department II at China Social Sciences under the Chinese Academy of Social Sciences， this is a process China has to go through in the long term. “The government， enterprises and individuals workers all need to adapt to the changes brought about the technological advancement，” Lin said.

“Once the economy transforms to one that is innovative， environmental friendly， low-carbon and centered on hi-tech industries and consumption， society will be much more stable.”

The director suggests learning from countries such as Russia and the United States about providing social relief and training for workers laid off in the process of industrial restructuring to help them secure reemployment and relevant job information.

Migrant jobs

Workers from north Chinas Shanxi and Hebei are likely to be affected the most since these provinces are Chinas largest coal and steel producers， respectively.

Hebei will see up to 150，000 steel workers laid off throughout the province， according to the provincial authorities. Around 100，000 workers will need to be resettled in five years， said Song Limin， Deputy Chief of Hebei Provincial Development and Reform Commission， at a press conference on April 21.

It will be difficult for these workers to find similar jobs locally. “So one of the main solutions is likely to be[workers] relocating to a coastal province where they are more likely to find a decent job，” Cui， the analyst， said.

Even if they were to migrate to other areas of the country， how would that affect the provinces theyve left behind？ Explaining the consequences， Lin said，“The huge transition will create greater development opportunities as these provinces can directly transform from the focus on highly polluting industries to those centered on the Internet and environmental protection.”

The workers lacking skills will still have to be laid off in provinces over-reliant on resource industries， Lin added.“The efficiency of production will improve and their salaries and consumption ability may improve as well.”

Song said some enterprises will not go bankrupt after overcapacity cut. They will continue to provide job opportunities through mergers and acquisitions.

The service industry， which accounts for more than half of Chinas GDP， is considered a reliable source of job creation.

Lin said those who are laid off will find jobs in the service sector after receiving training. Some may even start their own businesses. “After two or three yearsadjustment， the overall income level may increase，” the director added.

Resettling retrenched workers

The governments April 7 guideline has outlined four measures to resettle those to be laid off： relocation within the company， retraining， early retirement， and social security subsidies to those having difficulty finding new jobs.

A “back-to-work” program should be created so that workers receive training and career guidance for free. The program will also open channels for those who want to start their own businesses， giving them access to government support.

The government will arrange special job fairs for those to be resettled， and can provide living allowances for those who will be retrained.

Local authorities are required to enhance transregional cooperation to relocate redundant workers to regions with employment opportunities.

“The Hebei Provincial Government is mulling specific measures for resettling workers. We have already taken a series of measures including transferring them to other positions，” Song said. “We will mainly allocate workers to the service industry after offering them relevant training.”