China's Prosperity Cannot Hide Its Youth Unemployment And Underemployment Problems

China's leadership can hide some of the country's problems behind the prosperity of the old-day comrades who turned to modern-day landlords and industrial capitalists. It can blame the U.S. and its Asian and European allies for others. But it must recognize its youth unemployment problem. It's getting from bad to worse, with the government stopping providing data on it.

"Some young people with a master's degree are outright unemployed," a former student and now a professor in one of the country's prestigious universities," told the International Business Times. "Others deliver food. But too many are doing this job, so they must wait for a long time for customers to make the call."

Delivering meals is an important job, as is every job in a world of division of labor. But it doesn't require a university degree. People who can drive and follow GPS instructions can do it, meaning that university graduates doing this job are underemployed.

As a result, they waste their skills in low-productivity jobs, producing and earning less than they could make working in industries suitable to their credentials.

Then there's the nature of the food delivery business. It has people working in the industry remaining idle for a fraction of their working schedule. This problem worsens as the market becomes crowded by new entrants, meaning that food delivery graduates are underemployed for a second time.

Underemployment is neither a new nor unique problem in market economies or economies in transition. They are the result of market imperfections that lead to mismatches between the demand for labor and the supply of labor.

Nonetheless, in most cases, the problem of underemployment is usually temporary. It appears in mature economies in periods of severe economic contractions and recessions and fades away when these economies get out of the slumps.

But China isn't in a recession. Its economy continues to grow close to the official rate of 6%, which should improve things for its underemployed, not make it worse.

One explanation for this paradox is the nature of China's growth, which is still driven by real estate and infrastructure investments and exports. These industries benefit the economy's traditional sectors, like construction and manufacturing, rather than the modern service sectors.

In contrast to construction and manufacturing, services usually create jobs for highly skilled workers like university graduates. At least, that's the evidence from developed countries like the U.S., where services employ nearly two-thirds of the labor force.

Then, there's the collapse of the real estate bubble, which limits opportunities for young people with college degrees.

"Even at the peak of this phenomenon, China's infamous ghost cities underscored the fragility of the economy and the lack of long-term opportunities for the young population," geopolitical analyst and president of Scarab Rising Irina Tsukerman told the International Business Times.

Then there's the foreign capital flight as China continues to decouple from the global system, further limiting opportunities in the service sector.

"The more Xi pushes an aggressive anti-Western political position, the worse it gets domestically," Tsukerman said.

"China is also facing loss of consumer confidence and business risk concerns from international corporations," she added. "They have been voluntarily withdrawing out of concern for harassment and nationalization, and that's on top of natural relocation that has been ongoing for years because China has gotten too expensive to lend in profit, and these companies are moving to cheaper countries in the neighborhood."

Another factor contributing to diminished job opportunities, according to Tsukerman, is the rolling back of some of the overseas investment and BRI infrastructure projects, which previously provided opportunities for Chinese workers. "Now all these people have to come back home with little to do," she explained.

"Although it has succeeded in lifting millions out of poverty, in a country of well over a billion people, that still leaves many in minimal circumstances," Tsukerman added. "China has been far more focused on projecting success and power abroad and empowering useful elite classes than about taking care of the domestic bread-and-butter issues; the authoritarianism in institutions has discouraged innovation and expansion of opportunities."