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Multiple measures to stabilize employment

CAI FANG | 2020-03-10
(Chinese Social Sciences Today)
 
A worker checks production machinery at a factory in Hefei, Anhui Province, upon its resumption of operation on Feb. 10. Photo: CHINA DAILY
 

 

In recent years, the registered urban unemployment rate in China has stood mostly below 4%, and the surveyed urban unemployment rate has remained at around 5%, both stable and low, indicating that China’s employment situation is relatively steady. This scenario can be attributed to three major factors: First, the economic growth rate matches the potential growth rate, and various factors of production, including labor force, have been fully facilitated. Second, the service sector, new business entities, emerging businesses and new forms of employment have created a large number of jobs. Third, the government has given top priority to employment, strengthening services to support employment and entrepreneurship.
 
At present, to cushion the impact of the COVID-19 outbreak on employment, restore and stabilize employment as soon as possible, and achieve the annual employment target, we need to make up for potential losses via timely resumption of work and production and boosting new types of businesses. We must also continue to follow a proactive employment policy and be willing to use unconventional methods.
 
 
Resumption of work, production
In recent years, the driving forces of China’s economic growth have undergone great changes. The contribution rate of household consumption has exceeded 40%, while that of the tertiary sector has exceeded 60%. The impact of the outbreak has reduced consumption and demand for services, which will inevitably slow down economic growth over the same period. 
 
In addition, the delay of migrant workers returning to cities, the low rate of workers resuming their posts and the low rate of enterprises restarting operation are causing adverse impacts to ripple into the secondary sector, posing a challenge to the realization of the annual socioeconomic development goals, including employment targets.
 
Employment is the cornerstone of people’s livelihood, so we cannot afford to hit the pause button. At the moment, it is crucial to mitigate the impact of the epidemic as soon as possible, resume work and production in a timely manner, stabilize economic growth, and ensure we meet annual employment targets. 
 
All these actions require different regions to follow the unified deployment and coordination of the central government and to implement differentiated epidemic prevention and control measures based on the severity of local conditions. 
 
Nationwide, we need to restore the normal flow of transportation, logistics and personnel in an orderly manner, thereby putting commodities, materials and personnel in their respective places and getting production and business operations back up to full power. Then, we can expect the recovery of the consumption market to boost employment in the secondary and tertiary sectors. 
At this stage, we need to secure an adequate supply of basic necessities, such as grain, edible oil, vegetables and other everyday necessities, and keep their prices stable to spur consumption while increasing employment. We should also encourage the consumption of new products and services in health-related industries and create new jobs. While we actively promote online consumption, offline consumption should rebound and inject market vitality. Finally, we should to some extent stimulate the purchase of bulk commodities and durable consumer goods to drive economic growth.
 
 
New types of businesses
The 2003 SARS epidemic gives us some points of reference for the situation we are currently facing. The loss of consumption can be made up through the compensatory consumption that will come with the easing of the outbreak. However, it is worth noting that some of the shrunken consumer demand, such as in hospitality, catering, tourism, entertainment and passenger transport, cannot recover quickly after the outbreak, and what has been lost is largely irreversible.
 
Therefore, to tap into the consumption potential, we need to encourage profound and broad innovation in the tertiary sector. In recent years, the internet and mobile internet have given birth to many new business models and consumption platforms while boosting other models such as express delivery services, thus creating more jobs. We should give full play to the role of new types of businesses in the process of resuming work and production, stabilizing employment and ensuring people’s wellbeing.
 
The composition of China’s employment-absorbing sectors has undergone remarkable changes. The labor force of the primary sector has continued to shift to non-agricultural sectors, and the total employment in the secondary sector has also begun to decrease, whereas the tertiary sector is the only sector that has continued to maintain employment growth and positive employment elasticity. 
 
In this light, in order to stabilize and expand employment, we need to speed up the recovery of the tertiary sector and strive to help it achieve extraordinary growth throughout the year. 
At the same time, we should unlock the growth potential of the secondary sector, especially the manufacturing sector, and give full play to its role in employment via improving employment elasticity.
 
With the disappearance of its labor cost advantage, China’s manufacturing industry has witnessed two changes: A large number of labor-intensive industries at the lower end of the value chain have been relocated abroad, and capital-labor substitution has been widely applied to improve the capital intensity of the manufacturing sector. 
 
As a result, the share of manufacturing value added in GDP has been declining year by year since 2006, and the employment elasticity of the manufacturing sector has turned negative in recent years. That said, it is crucial to raise the proportion of the tertiary sector and upgrade and optimize the manufacturing sector as the industrial structure adjusts. 
 
However, in view of the uneven development level and resource endowment across regions and industries in China, the industrial structure also needs to be diversified. For a long time yet, China’s manufacturing sector should hold on to its position in the global value chain, whether downstream or upstream. 
 
Therefore, boosting the manufacturing sector and reversing negative employment elasticity in the manufacturing sector should be part of our effort to adjust the industrial structure in the new stage of economic development. Our efforts here are also important for offsetting the impact of the epidemic on the economy and employment. 
 
In response to possible enterprise migration and disruption of the industrial chain, especially the difficulties facing small, medium and micro enterprises, the government has introduced a package of unconventional policy support, aimed at reducing the burden on enterprises and helping them resume normal production and operation as soon as possible.
 
At the same time, we should take concrete measures to combine short-term support for the resumption of work and production with the long-term goal of boosting the manufacturing sector and improving employment elasticity. We must seize this opportunity to fundamentally resolve the lingering financing difficulties and high financing costs that have stifled the development of small, medium and micro enterprises.
 
In recent years, China’s business environment has improved significantly, leading to the emergence of new business entities on a grand scale. In 2019, an average of 19,900 new companies were registered every day, the vast majority of which were small, medium and micro enterprises. This high entrepreneurial activity is one of the important reasons why China has been able to create more than 13 million new urban jobs each year for seven consecutive years. 
 
Generally speaking, the number of new urban jobs in the first quarter of each year accounts for about 24% of the yearly total. This year, due to the COVID-19 outbreak, employment in the first quarter plummeted, taking a toll on employment growth for the whole year. Therefore, the government needs to further streamline its administration and delegate power, improving the business environment while taking strong supportive measures to promote mass entrepreneurship, thus minimizing the damage to employment.
 
 
Unconventional policies
To cope with the epidemic’s limited and short-lived blow to employment, more unconventional measures should be incorporated into proactive employment policy to stabilize employment and better protect people’s livelihood.
 
To start with, we should continue to raise the employment-first policy to the status of a macro policy. Upon migrant workers’ return to cities for work, the minimization of losses in employment should focus on keeping the surveyed urban unemployment rate from exceeding the expected target of 5.5% for the whole year. 
 
To this end, current macroeconomic policy should shift to a relatively expansionary or more aggressive level. Monetary policy should focus on both supply and demand ends, strengthen counter-cyclical adjustment, increase support from financial institutions, and accurately solve the financing difficulties facing small, medium and micro enterprises. 
 
Fiscal policy should further cut taxes and fees. While reducing the burden on small, medium and micro enterprises, the government should also prepare special bailout arrangements. Investment in construction projects should strengthen weak links and optimize the structure to maximize the revitalization of small, medium and micro enterprises and promote employment through the multiplier effect.
 
In addition, the government should provide more targeted and precise public services to ensure stable employment. The dilemma we face this time comes from both the demand side, caused by weak investment, consumption and exports, and the supply side, caused by insufficient operation or even partial breaks in industrial chains. Therefore, it is necessary to expand the depth and breadth of public services and further improve the pertinence and precision of policies and measures.
 
First, we will combine measures to expand the scope of social policy support to include policy to promote employment. In recent years, China’s unemployment insurance funds have accumulated a relatively large balance. In addition to paying out the insurance in full and using it to help businesses keep their payrolls stable, it should also be used to support the subsidies necessary for migrant workers to return to the city. 
 
Second, we should better match the supply and demand of labor through training and intermediary job agencies to reduce frictional unemployment. Enterprises are also encouraged to retain talent. The government can perform the function of “final employer,” offering temporary training opportunities to unemployed workers and providing transitional public welfare positions. In this way, workers can improve their skills between jobs while the probability of structural unemployment can be reduced in the next phase.
 
 
The article is edited and translated from Guangming Daily. Cai Fang is vice president of the Chinese Academy of Social Sciences (CASS) and a CASS Member. 
 
edited by YANG XUE