The Chinese Skills Disconnect: An Opportunity for Us?

The New York Times headline read “Degrees, but No Guarantees.” However, the story was not about the students graduating from American universities this season. Instead, it was about Chinese grads. It seems that Chinese businesses are swamped by job applications from graduating students but have few jobs to offer. At the risk of seeming to express schadenfreude, I want to point out that as bad as our economy seems for our own grads, their prospects are better than China’s.

The problem is not just that growth of the Chinese economy has slowed from its fever pitch of the previous several years. More fundamental is the nature of that economy. Like the postwar United States economy, it is growing mainly from manufacturing. You only have to prowl the aisles of your local Walmart to see the fruits of that manufacturing prowess. However, in an economy that has a very large share of low-tech manufacturing, such as the plants that produce plastic toys, rubber tires, kitchen utensils, or even iPads and other high-tech devices that are assembled by hand, there is a limited need for college-educated workers.

In the postwar American economy, millions of workers with only a high school diploma or even less education were able to find low-tech work in manufacturing plants and earn middle-class incomes. But more and more young people are getting college degrees now, despite the fast-climbing expense, because those low-skill jobs have largely vanished, exported to China, and the low-skill service jobs that remain are very low-paying.

But consider the implications for China. Think of it this way: We have not only exported the 1950s-style manufacturing capability, but also the accompanying 1950s-style skill requirements. Chinese universities are capable of churning out hordes of graduates, having quadrupled the number of college students in the past decade. But at this point in its development, China’s economy does not particularly need these grads.

A survey released last winter of Chinese young people age 21 to 25 found 16 percent of the college grads unemployed, but only 4 percent unemployment among those with only an elementary school education. This is the reverse of what you’ll find in the United States, where the May 2013 unemployment rate was 11.1 percent for those with less than a high school diploma and only 3.8 percent for those with a bachelor’s degree or higher.

There certainly is a case to be made that China is preparing human capital for the economic transition that will occur as wages rise, as manufacturing shifts to still lower-paying countries, and as their economy starts looking more like ours does now rather than our 1950s model. But what will the young grads pouring out of the universities find to occupy themselves until that shift occurs? And if that shift is somehow accelerated—for example, if China’s government invests very heavily in research and development activity—what will happen to today’s huge cohort of low-skilled Chinese workers?

America’s “greatest generation,” which prospered during the postwar period, has already left the workforce. They had several decades in which to enjoy the match between their skills and their nation’s economy. Among the baby boomers, who got their start in that postwar economy, many now are suffering from the shifted economy but at least had many good years of opportunity. What about China? With worldwide economic development now moving so fast, will millions of Chinese factory workers have the rug pulled out from under them as their 1950’s-style economy disappears? Or will China find some way to slow this transition and continue to disappoint the college grads? Either of these alternatives promises to cause social unrest.

There is still one more possibility: that China will do what we did with community colleges in the 1970s, only on a much bigger scale—that is, invest heavily in adult education and retool the hordes of low-skill workers for the inevitable economic shift. Online courses, in particular, could facilitate a golden age of Chinese adult education in the next decade. But consider that the online lessons won’t need to be based in China. Thousands of Chinese students are now coming to brick-and-ivy universities in the United States because of our sterling reputation for higher education. We are now pioneering online education. If we play our cards right, perhaps Chinese-language online education can be one of our hottest export industries in the next decade.