In the works

Even in the face of the novel coronavirus outbreak, China managed to exceed its annual employment target, with the overall employment situation stable in 2020. This has provided a strong guarantee for achieving the goal of building a moderately prosperous society in all respects and for the improvement of economic and social development during the 14th Five-Year Plan period (2021-25).

China's labor market is undergoing profound changes because of the economic structural adjustment and industrial transformation and upgrading, along with the accelerating aging of the population, which presents both opportunities and challenges to China's employment situation.

During the 14th Five-Year Plan period, the labor supply will decline from 756 million to around 726 million. The supply and demand gap in the labor market is expected to widen to about 6 million by 2025 and about 20 million by 2035.

Economic development will rely more on the improvement of labor productivity, and the main goal of employment policies will be generating high-quality jobs.

There are multiple barriers yet to be removed.

First, it is estimated that by the end of 2025, the mean years of schooling of the population above the age of 15 will be raised to over 11 years, and the gross enrollment rate of higher education will be over 55 percent. However, it takes time to accumulate human capital while the pace of technological change and economic transformation is rapid. China is still short of talent and skills to meet its goals for the new development stage.

Second, labor productivity in the industrial and service sectors has once again diverged, and it is expected that, driven by the new technological revolution, the productivity divergence will worsen during the 14th Five-Year Plan period. Labor productivity in the service sector is lower than that in the industrial sector, but its share of employment continues to rise. The further improvement of labor productivity depends on the upgrading of both sectors, which brings new challenges for the accumulation and reconfiguration of human capital.

Third, the new technological revolution has brought profound changes to the employment structure and the demand for skills. In the future, robots and artificial intelligence will fully penetrate the labor market. As new technologies make it easier to master operational skills, most low-skilled workers will be transferred to other posts rather than being eliminated directly, but the application of new technologies will widen the wage gaps among workers.

Fourth, from the regional perspective, the economically developed eastern regions are basically in full employment, but there are some risks to the employment situation in the central and western regions. In regions with depleted traditional resources, single industrial structure, lack of job opportunities and high outflow of human resources, there are high unemployment rates and low labor participation rates.

Strategies and policies to promote employment should adapt to the changing trends of the times and major contradictions in the employment market. Measures can be taken in the following areas:

Key indicators such as the labor force participation rate, unemployment rate and employment rate should be taken as the basis for making monetary and fiscal policies. During the 14th Five-Year Plan period, employment policies should be coordinated with population, economic and social security policies to ensure economic vitality and the job market.

Under the downward economic pressure, full play should be given to the job creation capacity of the service sector and emerging industries, and labor productivity should continue to be raised. To achieve full employment in the coming five years, we need to continue to deepen supply-side structural reform, intensify tax and fee cuts, enhance business vitality and create more high-quality jobs. We should improve the social security system to encourage business start-ups to create jobs and support the development of new forms of employment in a regulated manner.

It is necessary to foster a human capital system that meets the requirements of the new technological revolution. Thus, it is a good idea to invest in human capital by encouraging life-long learning. Attention should be paid to jobs that are easily replaced by automation, with targeted training provided to those affected.

China should further deepen reform of the household registration system, loosen the population control restrictions, improve the people-oriented residence permit system, and develop the points-based household registration system based mainly on years of stable residence and work. We should improve the mechanism linking social security between urban and rural areas and between different regions, and ensure that the system of minimum living allowances for urban residents and the policies for renting public and long-term housing cover all permanent residents.

The labor market system should be more inclusive and incorporate non-standard employment into the system. The employment demand survey mechanism should be improved, with an unemployment monitoring and early warning system built on the basis of surveyed unemployment rate. Key employment indicators for cities and different groups of people should be regularly reported.

The traditional employment-related social security system is facing challenges. In the future, the social security system should better accommodate the unemployed groups affected by new technologies, reflecting the new concept of people-oriented, shared development.

Zhang Juwei is director of the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences. Cheng Jie is an associate professor of the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences. The authors contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.