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China’s labour lesson

March 13, 2013

ImageChina has ascended to a unique dilemma, one that unusually makes India feel good about her situation. The Middle Kingdoms past few decades of excessive emphasis on manufacturing and impetus to higher education have availed citizens in a skill bind. Having borne the fruits of their labour, Beijing is now witnessing a positive curve towards a higher number of graduates than ten years ago, With the simultaneous spurt in manufacturing, Beijing’s dilemma now lies in employing their educated lot on the factory floor.

The new conundrum has created the adage that more than half of the educated youth in urban China will face unemployment as their skills don’t match jobs being created by the government. In retrograde, rural semi-skilled workers who are now few and far between are in high demand as factory labour.

India in contrast has developed her services sector and in tandem cultivated management, finance and technology based universities which support the additional jobs being created. The unemployment rate as a result is stable and people are more secure in their jobs. Additionally, the government can give labour in rural areas the impetuous to be highly educated in order to offer them competitive employment and a better standard of living in the city.

Avidly discussed during Beijing’s National People’s Congress meeting last week, the growing unemployment rate leading to an unstable society, is additionally compounded by rising GDP figures and and a declining working-age population leading to higher unit labour costs (ULC) (see pic).

Analysts who have pondered the situation have concluded with a solution – China needs to increase her factory efficiency levels, leading to making working in factories more desirable, increasing the scope of factories moving inland to more labour intense areas and higher wages at factories leading down the value chain to better services.

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