The great wall of unemployed

Nov 27th 2008
From The Economist print edition

Joblessness in China is rising, prompting fears of social unrest. But how high is the true unemployment rate?

THE employment outlook is “grim” according to Yin Weimin, China’s minister of human resources and social security. So grim, in fact, that on November 26th the People’s Bank of China slashed rates by more than a percentage point—the most in 11 years—to boost growth. The slowing economy has led factories to cut jobs, and there are mounting fears that the swelling ranks of the unemployed might one day take to the streets and disrupt China’s economic miracle. To assess such risks one must consider how high unemployment might rise.

The snag is that both the level and trend of China’s official jobless figures are meaningless. Until the 1990s, the government more or less guaranteed full employment by providing every worker with an “iron rice bowl”—a job for life. But when soaring losses at state-owned firms forced the government to lay off about one-third of all state employees between 1996 and 2002, the official unemployment rate rose only slightly. Today it is 4% in urban areas, up from 3% in the mid-1990s.