Degrees, But No Jobs.(China)

Just east of Beijing there is a tiny shantytown where men shoot pool on tables set up on the street, filthy children play with stray dogs and women sell grapes and apples from makeshift stands. Little Zhang Village has long been home to day laborers, laid-off workers and struggling artists and musicians. But 22-year-old Yi Bo, a skinny kid with glasses and freckles, represents the latest group to take advantage of the area's dirt-cheap rents: the unemployed college graduate.

Yi and 30 of his classmates moved to Little Zhang Village after graduating this summer. Now they spend their days hanging out in Internet bars, waking each other up to go to job fairs, swapping job leads--and helping each other out with grocery money. "It's just too competitive this year," Yi said of his job hunt. "I feel guilty because I've graduated and still have to spend my parents' money. I want to find a job as soon as possible."

China's university graduates are facing the toughest job market since the Communist takeover. By June only half of the country's 2002 grads-- about 1.5 million young people--had landed jobs. That's the lowest percentage since the government began tracking the graduate employment rate in 1996. The situation has shocked Chinese society, where a university degree has always meant lifetime security and status. Now, for the first time, the Middle Kingdom has a glut of graduates.

Only a tiny fraction of China's 1.3 billion people go to college. Still, the number of university students has skyrocketed in recent years. A five-year campaign by the Chinese government to expand access to college has doubled the number of those matriculating. In fact, China's class of 2003 is the largest ever--2.12 million students. About a quarter of China's urban labor force now hold college degrees. The problem is, there aren't enough jobs for new graduates--or, at least, enough of the jobs that they want. And there won't be for a long time. "This will be a problem for at least 20 or 30 years," said Yang Yiyong, an economist with China's State Council.

The unemployment rate among university graduates worries Beijing because it's not just an issue of oversupply. There are jobs available for educated Chinese, but they're unglamorous middle-management positions--factory managers, local bureaucrats, even police officers. Many of China's new graduates expect jobs with high-tech companies, multinationals or the top levels of government. Some would rather go without work than consign themselves to what they perceive as drudgery.

Managing their high expectations presents China's leadership with a thorny political challenge. Students have always been in the vanguard of rebellions in China. The Communist revolution itself succeeded with the support of angry students who could be heard at rallies shouting that graduation meant nothing but unemployment. Now, students are reviving that slogan, and anxious officials are paying attention. In some ways, economist Yang argues, the government is doing more to help college graduates than the millions of blue-collar workers laid off from state factories. "Graduates are a sensitive group," he said, "so the government pays a lot of attention to them and tries to meet their demands."

Among other measures, Beijing has begun requiring that universities provide more career guidance. Colleges must set up job fairs and offer employment seminars. In addition, the government is offering tax incentives to small- and medium-size firms that hire recent college graduates and waiving China's hefty fee for registering a new company in the hope that new grads will become entrepreneurs. It is also giving preference to students who apply for government jobs or graduate school if they agree to work in poor areas of the country for two years.