China’s Labor Market Transformation.
China’s labor market, the world’s largest, is experiencing significant changes due to shifts in demographics, work attitudes, and industry developments. An aging population, a decreasing working-age population, and the emergence of new employment types are prompting China to focus on upskilling its workforce for increased value and efficiency. This article examines China’s current labor landscape and explores the trends shaping the future of its economy.
This article is based upon the article China’s Changing Labor Market by Arendse Huld originally happeared on china-briefing.com, Dezan Shira & Associates
In March 2023, the All-China Federation of Trade Unions (ACFTU) released its Ninth National Workforce Survey. The survey provides comprehensive data on China’s labor market, including workforce composition, evolving work attitudes, and emerging employment trends. Notable changes since the last survey in 2017 will have long-lasting effects on China’s industry and economy.
A Snapshot of China’s Labor Force
A recent survey by the ACFTU revealed that China’s labor force has expanded to 402 million individuals in early 2022, a substantial increase from the 391 million reported in 2017. The National Bureau of Statistics (NBS) estimates that approximately 733.5 million people aged 16 and above are involved in some type of paid work, down from 746.5 million in 2021.
In 2022, around 293 million migrant workers—individuals who moved from rural to urban areas for employment—comprised about 72% of the total labor force.
Age and Educational Background
The average age of workers in China rose to 38.3 years in 2022 from 37.1 years in 2017. Industrial workers’ average age was 38.29 years, while the majority of professional technical personnel were between 30 and 50 years old, primarily employed in education, manufacturing, and healthcare and social work sectors.
Workers’ average education duration increased slightly to 13.8 years in 2022, up from 13.6 years in 2017. Over 85% of workers had at least a high school diploma, and 35% held a college degree. Tertiary industry workers, or those in service industries, had the highest average education length of 14.5 years. Secondary industry workers, such as those in manufacturing, had an average of 13 years of education. Workers in primary industries, like agriculture and resource extraction, had the lowest average education length at 12.5 years.
Industrial workers, who encompass a wide range of roles across all three industrial sectors, had an average of 13.16 years of education, and 29.3% held professional and technical titles.
New laborers typically had a high school education or lower. Among truck drivers, 70.7% had a junior high school education (equivalent to nine years) or less. In contrast, 38% of online car-hailing drivers had a college education or higher, while couriers and delivery drivers generally had a high school education (total of 12 years) or lower.
Industry Shifts and Labor Costs
A significant change in China’s labor force is the rising proportion of individuals engaged in “new forms of employment,” similar to the Western concept of “gig workers.” These workers offer various services through internet platforms on a flexible, on-demand basis, such as online car-hailing drivers, couriers, and food delivery drivers.
Around 84 million people are currently employed in this capacity, comprising approximately 20.9% of the total workforce. Although the ACFTU survey didn’t provide specific demographics, the majority of these workers are believed to be young to middle-aged men from rural areas.
The lion’s share of industrial workers, 82.7%, are employed in secondary industries, with 77.6% in manufacturing and construction. The proportion of industrial workers in tertiary industries is also growing, though specific figures were not provided in the survey.
Labor costs in China have continued to rise, mainly due to increasing living costs and income levels as the economy grows and ascends the value chain. Data from the NBS reveals that the average wage income per capita was RMB 20,590 (around US$2,993) in 2022, a 4.9% increase from the previous year, accounting for 55.8% of disposable income. Migrant workers’ average monthly wage was RMB 4,614 (around US$671), up 4.1% from 2021.
Minimum wages have consistently risen across all Chinese regions. Monthly minimum wages range from RMB 1,420 (around US$206) in some areas of Liaoning Province to RMB 2,590 in Shanghai. 14 regions in China, including Beijing, Hebei, Jiangsu, Zhejiang, Guangdong, and Sichuan, now have a minimum monthly wage exceeding RMB 2,000 (around US$308).
The average annual income for urban residents in 2021 reached RMB 106,837 (around US$15,529), surpassing the RMB 100,000 mark for the first time. The industry with the highest average income was information transmission, computer services, and software industries, averaging RMB 201,506 (around US$29,290) per year. The lowest average annual income was in the accommodation and catering industry, at RMB 53,631 (around US$7,795). The rising labor costs in China coincide with an overall increase in spending and living costs. Data from the NBS indicates that China’s per capita disposable income grew to RMB 36,883 (around US$5,361) in 2022, a nominal increase of 5% year-on-year. Meanwhile, living costs have risen, particularly in manufacturing hubs like Shanghai and Guangdong Province.
Besides increasing wages and living standards, the growth in costs is also attributed to the enhancement of employees’ education and training. As China aims to elevate its economy by modernizing traditional industries and concentrating on high-value goods production, the demand for higher-skilled labor—and its higher cost—continues to grow.
Shifts in China’s Labor Market: Aging Population and Emerging Trends
China’s demographic changes are anticipated to significantly impact the country’s workforce composition in the coming years.
One notable trend is the consistent rise in the working-age population. As previously mentioned, China’s labor force’s average age increased from 37.1 in 2017 to 38.4 in 2022. This puts China’s average worker age above that of other developing markets like Mexico and Vietnam (which had average workforce ages of 29.3 and 31.9 in 2021, respectively) but significantly lower than most developed countries, such as Germany and Japan, which are further along in their demographic transitions.
China’s population experienced a decline for the first time in decades in 2022, decreasing by approximately 850,000 individuals. UN demographic models predict China’s population will drop to 1.313 billion by 2050 and below 800 million by 2100.
The rapid population decline will also lead to a shrinking labor force, posing a considerable challenge to China’s economy, which has been powered by a large, active workforce over the past few decades. Primary and secondary industries are expected to bear the brunt of the population decline as younger generations favor higher-paying, more comfortable service sector jobs over traditional manufacturing.
The ACFTU survey revealed a structural gap in conventional manufacturing fields, with a demand for upskilling employees. This is partly due to younger generations being less willing to work in factories.
Although China’s aging population presents a long-term challenge to its economy, significant labor shortages across various sectors are likely still several decades away. In fact, China has faced more unemployment issues than labor shortages in recent years. In January and February 2023, the surveyed unemployment rate for the general population was 5.6%, while youth unemployment (ages 16 to 24) stood at 18.1%.
China is currently concentrating on modernizing its traditional industries and addressing the risks of a diminishing workforce by investing in automation and digitalization. In the future, China’s value will increasingly derive from skill rather than volume, and the training and upskilling of existing employees will become increasingly critical.
Advancements in Labor Rights
Despite the challenges in establishing and safeguarding the rights of gig workers due to the flexible and irregular nature of their work, the Chinese government has made efforts to enforce labor protection regulations on internet companies operating these platforms.
For example, in 2021, China’s State Administration of Market Regulation (SAMR) issued policy guidelines directing internet platforms providing food delivery services to ensure workers receive minimum wage, are not subjected to excessive working hours, and comply with specific safety standards, among other requirements.
In March 2022, the Cybersecurity Administration of China (CAC) introduced regulations on the application of recommendation algorithms on service platforms, which, among other provisions, require the algorithms to protect “workers’ legal rights and interests, such as remuneration, rest time, and holidays.”
China’s Trade Union Law was amended in 2022 to ostensibly allow gig workers to form unions. However, due to China’s strict laws governing trade union activities, it remains uncertain how much influence workers will have to advocate for change.
Significant strides have been made in protecting the rights of women in the workforce in China. In October 2022, China passed the Law on the Protection of Women’s Rights and Interests (“Women’s Protection Law”), incorporating workplace gender discrimination into the scope of labor security supervision. The law explicitly forbids gender discrimination during the hiring process, including discrimination based on gender or requiring specific maternal or marital statuses. It also further clarifies the definitions of sexual harassment in the workplace, thereby reinforcing the enforcement of other laws and regulations.
China has also taken steps to combat the widespread “996” work culture in many white-collar environments, where employees are expected to work from 9 am to 9 pm, six days a week. In September 2021, China’s top court declared the “996” work schedule to be illegal under Chinese labor law.
Emphasis on Work-Life Balance and Skill Development
In recent years, there has been a growing awareness of work-life balance and an increasing backlash against overwork in China’s work culture. This is especially evident in white-collar professions, likely due to their higher visibility within society. Several high-profile incidents at tech companies have sparked renewed criticism and backlash against the “996” work culture.
This sentiment is echoed in the ACFTU survey, which discovered that 20 percent of respondents would like more leisure time.
The survey also revealed that employees place greater importance on their long-term development, with 95.3 percent of workers expressing interest in learning new vocational skills or knowledge. This percentage is particularly high among employees aged 18 to 40 and those with a bachelor’s degree or higher.
Enhancing China’s Workforce for the Future
China’s labor force remains highly competitive when compared to other markets. Considering the total number of people engaged in some form of work, China maintains the world’s largest workforce, which continues to be a major attraction for companies. The country also has an extensive workforce in key industries like manufacturing and a growing number of people employed in high-value sectors such as technology, finance, and professional services.
As China’s working-age population is expected to shrink long-term, maintaining a competitive labor force will depend on increasing efficiency and workers’ skill levels. The Chinese government is already taking steps towards this goal by implementing various policies aimed at enhancing vocational training, like the “14th Five-Year Plan” Vocational Skills Training Plan released in 2021. This plan seeks to improve workers’ employment and entrepreneurship capabilities while addressing structural employment conflicts by enhancing the vocational skills training system, increasing training supply capacity, raising training quality, promoting standardization, and improving skilled personnel’s vocational development channels.
In October 2022, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council released the Opinions on Strengthening the Construction of High-Skilled Talent Teams in The New Era. Among other targets, these opinions call for raising the proportion of skilled workers in employment to 30 percent by 2025, up from 26 percent in 2021.