Monday, 9 February 2009

When the economy is heading south, where are the young heading?

Two recent news items, one from China and one from India, showcase the challenge of employing millions of graduates in the world's fastest growing, although now much slowed down, economies.

The IMF has revised its growth forecasts for Asian economies in 2009 at just 2.7% (just two months ago it had predicted 4.9% for Asia). China and India are now expected to grow at 6.7% and 5%, respectively. Given that expected growth rates have halved in a year, both countries face severe employment challenges. Already factory closures have meant that 20 million migrant workers in China have been forced to head back into the countryside. India also has to deal with thousands of retrenched workers returning from the Middle East (already some 30,000 have been sent back).

At the same time, skilled workers are not finding it any easier. The story from China is that the government has developed plans to send college graduates into rural areas. Unemployment among recent college graduates is at 12%, nearly triple the national average. So, in Shanghai the government is promising to pay off student loans if they sign up to work in the countryside: 78,000 students have agreed. Beijing municipality says an additional 3,000 will work as village officials this year. The tasks range from working as librarians, handing out health notices, conducting agricultural surveys, or helping to build the local Communist Party organisation. In reality, the young engineers and other skilled professionals have little say in village governance. Despite the boredom, they hope to collect brownie points for future civil service exams. Moreover, they have no other option: the moneyed jobs in the city are fewer and far between.

In contrast to the state-led programmes in China, the story from India points to a growing demand among business school graduates for non-profit work. Investment banks, the graduates' top choice until last year, were offering salaries up to $200,000 a year. Now, among the firms still hiring, offers are 25% lower and there is no guarantee that the students will retain their jobs for any significant length of time. So, business schools are encouraging more students to take up entrepreneurial ventures. But many are also opting for pay cuts and are seeking work in NGOs or volunteering their time with charities. The Financial Times says that the 'mad pursuit of money' has started to slow in India.

Money might not be the sole motivation anymore but that is because there is little to go around in the current crisis. But whether young, skilled workers are being driven into 'development' work by the state (China) or because of their own choices (India), there is an opportunity to harness the talents of the youth for a range of public policy issues. The challenge would be to channel skills into the right jobs; if the only outcome is temporary 'CV-building', then the opportunity would have been lost.

1 comment:

Tara Srinidhi said...

Your views on unemployment issues and solutions sought by China and India are timely and will be a good one to share with my IB Econimics Year 12 class when we begin discussions on Macro Economic Objectives of a government. Thanks for the same. Tara aunty