China Part III: Labor Supply and Demand

10/18/2010 - On my recent visit to China I had the chance to conduct fieldwork for a large new research project on Developing the Skills of the 21^st Century Workforce with Prof. Mingwei Liu.  Mingwei was my first assistant professor hire at SMLR, and we are delighted to have attracted him to Rutgers, as he isalready establishing himself as one of the leading scholars studying labor issues in China.

Central to our project is a comparison of China and India’s skill development systems, which between them, will account for over one-third of the world’s workforce this century.  We in the West are very familiar with the graduates of India and China’s elite universities, who often come to the US for graduate school, but we know very little about the education and training that the vast majority of the population receives, and the major investments and reforms now underway to transform and upgrade these skill systems. In addition, we believe that there is much to learn through a comparison of these two systems: one the world’s largest and messiest democracies, which has become a global leader in knowledge services; the other a very strong one-party state which has become the global leader in low-cost manufacturing.

During our two and a half weeks in Beijing and Shanghai, we spoke with company executives, government policymakers, education and training providers, heads of industry associations, union officials, and academic experts to get many perspectives on how China is tackling its skills challenges.  Of all these interviews, the one that has stuck with me the most is a story from is an American woman serving as part of the leadership team for a rapidly growing Chinese IT company.  She has been working in Beijing’s rapidly expanding IT services industry since 2004 while raising three children.  She told the story of her 18-year old daughter who had just graduated from the Western Academy of Beijing with the international baccalaureate, and was looking for a job before applying to vet schools.  She found one teaching English and dance in a private elementary school.  For this job, she is paid four times what Sara’s firm pays its entry-level graduate engineers.

I believe there are at least three important lessons to draw from this story:

1. The laws of supply and demand are still very powerful– With the advent of the internet, the fall of the USSR, and the expansion of the WTO, the global labor supply available to multinational corporations has effectively grown by over one billion people in the last two decades.  Those with high-level, but very common, skills whose work is easy to move across borders – such as software engineers – are going to come under severe wage pressure.  Meanwhile, as the proud mother noted: “Personable Western young women who have a working knowledge of Mandarin are relatively rare in Beijing.”
2. Build a differentiated set of capabilities– Our son is applying for college, making me even more conscious of the question I’m often asked by our students or parents: “What careers advice would you give young people today given the difficult job market and growing global competition?”  There are no easy answers, but I believe the best prescription for success is to encourage each person to seek the intersection of some area or areas for which she has passion and strong natural talent, and to pursue it to develop distinctive if not unique capabilities.  Some strong enablers to add to this skill set would be: cross-functional and interpersonal skills that help one effectively lead teams, entrepreneurial skills that allow one to turn a passion into a business, and having a global perspective and speaking multiple languages (Note to self: remind our daughter, who has a great ear for languages, to consider Mandarin).
3. English will remain the global business language for decades to come – There has been speculation that, as China’s global economic influence expands and the number of internet users whose first language is Mandarin approaches the number of English speakers, Chinese will replace English. But I believe there are several reasons this won’t happen in my lifetime: the fact that English is so firmly established as the global business language and the strong path-dependency of such standards once they are widely adopted (e.g., the QWERTY keyboard); the much greater difficulty of learning to speak and write Chinese; and the power of demographics, as the long-term effects of China’s one-child policy have led to a dramatic slowing in population growth.  It seems that Chinese parents have made this judgment too: they are investing heavily in English lessons, even for pre-school children, to try to ensure that their “little emperors” (as this generation is often referred to in China) are best prepared to succeed in tomorrow’s global labor markets.