Opinion
More jobs, better society
By Ding Jin (China Daily)
Updated: 2010-08-14 16:07
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Policymakers should make employment generation and raising people's income top priorities to boost consumption
Employment has become the theme of the post-global financial crisis era. But China's macroeconomic policy has not yet made employment the prime target on its development agenda. Its current targets mainly include economic growth, job creation, price stabilization, and improving the balance of payments.
The annual session of the National People's Congress in March concluded that the country's economy was likely to grow by about 8 percent in 2010, more than 9 million urban residents would find jobs, the urban registered unemployment rate was likely to be within 4.6 percent, the rise in the consumer price index would be about 3 percent and the balance of payments would improve.
For long, "economic growth" has been China's primary development goal, with all other factors helping it to achieve it. For example, the third article of the Law of the People's Republic of China (PRC) on the People's Bank of China, adopted in 1995, stipulates that the aim of its monetary policy is to maintain the stability of its currency and thus promote economic growth.
The Budget Law of the PRC, which took effect in 1995, says the law has been enacted in accordance with the Constitution to strengthen the distribution and supervisory function of the budget, improve the State's budget management, intensify the macroeconomic regulation and control and ensure sound socio-economic development. None of them talks explicitly about making employment generation a primary target.
The two laws were formulated in the mid-1990s, when China was experiencing fast economic growth which, in turn, led to high employment growth rates. But since the late 1990s, economic growth has failed to generate the same percentage of jobs.
Official data show that during the 9th Five-Year Plan (1996-2000), a GDP growth of 1 percentage point created 900,000 jobs. But by 2006 and 2007, the number had fallen to 500,000.
Now that China's economic structure and employment situation have undergone a change, the 12th Five-Year Plan (2011-2015) should accord top priority to job creation and make employment growth the primary target of its economic development.
China is the most populated country in the world with rich human resources. Demographers estimate its population will continue to grow until 2032. At present, the country's total working-age population is about 770 million, five times the labor force of the United States. And even though it is expected to create 6.3 million new jobs this year, compared to only 300,000 by the US, its total labor force will continue to exceed the demand for a long time.
According to the Ministry of Human Resources and Social Security, the country's urban unemployment rate was 4.2 percent at the end of June, with 9.11 million urban residents registered as unemployed. This, along with other important factors, should make job creation a high priority on China's economic development agenda.
In the initial days of reform and opening up, China strived to develop labor-intensive industries to capitalize on its supply of low-cost labor, leading to fast national economic growth and high rate of employment generation. But during the late 1990s, it became highly dependent on investment and exports for growth and neglected the role of consumption, one of the three major forces driving economic growth.
Since the late 1990s, the proportion of consumption in China's economy has been declining steadily. In relative terms, the contribution of consumption to China's economy is not only miniscule compared to the US, but also smaller than that in some developing countries such as India.
A proactive fiscal policy alone cannot increase domestic demand. China has to take more measures to increase people's income in order to stimulate consumption and thus promote economic growth.
According to Okun's law, every 1 percent increase in a country's unemployment rate could lower its potential GDP growth by 2 percent. Given the threat unemployment poses to the country's economy, the leadership has no choice but to prioritize job creation.
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It's time China's macroeconomic policy looked beyond GDP growth and paid more attention to people's livelihood. If economic growth cannot create enough jobs, it means economic planners have not put people first in their development goal.
Employment should be the prime factor while judging the performance of a country's economy. And China can score high on that front only by making job creation a high priority in the 12th Five-Year Plan.
If it does so it would take a strategic step that conforms to the Scientific Outlook on Development, propounded by leadership of the country. That would help build a relatively affluent society and achieve modernization both.
The author is deputy head of Nanjing-based Jiangsu Administrative Science Institute. The article was first published in China Reform News.