Economic Reform and Development the Chinese Way

Theoretically speaking, any nation can grow its economy either by expanding its workforce or by investing more in machines and equipment and improving workers’ technical knowhow and skills. The adoption of labor-saving technology and equipment may help cut down the material production sector’s demand for workers in the course of economic growth. Consequently, given a constant population growth rate, economic growth itself cannot ensure full employment. The number of jobs to be created through output increase is determined not only by the rate of production expansion, but also by which approaches are adopted for such expansion. If a country develops its economy not by hiring more workers but by adopting new technology and equipment and improving workers’ cultural and technical proficiency, then the ability of its material production sector to absorb the workforce will be limited.

On the other hand, economic growth also entails a process of change in a nation’s economic structure. The inexorable law of material production is that some old manufacturing industries decline or are phased out while new ones rise and grow. The ratio between material and nonmaterial production in the national economy is changing as well. It is an irrevocable trend in economic growth for some nonmaterial production industries to grow in strength along with their shares in the national economy. With the national economic structure changing constantly, those working in languishing or failed industries need to find new jobs elsewhere. The rising industries in material production, and particularly the burgeoning industries in nonmaterial production, often run short of workforce. Thus in the long term, the emergence and growth of new industries in both material and nonmaterial production are major reasons why a nation can increase employment amidst economic growth.

The changing economic structure of a nation implies changes in both industrial and geo-economic structures. In China, underdeveloped regions may achieve a relatively higher economic growth rate, whereas developed regions may slow down, or grow at a relatively lower pace. Regions that either suffer a low growth rate or maintain a high growth rate mainly by spending more on technology and equipment will produce a glut of factory layoffs that will have to seek employment elsewhere, whereas regions with a high growth rate, those with a labor shortage in particular, are likely to accept the job-hunters.

These situations prove clearly that the employment problem confronting a country in the process of economic growth is mainly “structural.” That is to say, the success or failure in tackling this problem hinges on whether the workforce structure – the makeup of workers of different trades, industries and locations in a region’s total number of workers – is commensurate with local economic growth rates and economic structural changes, and whether the workforce itself can meet the technical needs of local economic growth. When the structure of a workforce does not match the local economic growth rate and the changing local economic structure, and when workers’ technical proficiency level falls short of the needs of economic growth, unemployment will unavoidably exist alongside a surplus of unfilled job vacancies.

This paradoxical coexistence of unemployment and superfluous vacancies means that while people are looking?frantically?for jobs, many jobs are left unfilled. How is it that people lose jobs while the economy keeps growing? The answer is that if economic growth is achieved for the most part by raising labor productivity, while the population growth rate remains relatively high, those coming of employment age are likely to fail to land suitable jobs. Even if these people are a nonfactor, industries and regions with slow or stagnant growth lay off workers. This is particularly true of developing countries, where agriculture – known for its low labor productivity – often dominates the national economy. In the industrialization process, large numbers of villagers who have just quit farming may find it hard to land jobs. Unemployment – concealed unemployment included – thus becomes unavoidable.