Why More Chinese Workers Are Settling for Less Pay

With the economy in a funk and deflation settling in, many people are having to settle for jobs beneath their skill levels, often with reduced pay. That is making it harder to make ends meet, depressing consumer spending and leaving many people frustrated in careers they fear are going nowhere.

In Beijing, Kang Deqiang spent much of the past two decades working as a marketing executive for Chinese media firms, until his last employer, a media outlet focused on railroad travel, went out of business during the pandemic.

Now he manages a dormitory building at a local college, a job that pays only about $500 a month after taxes—about 20% of what he earned at his peak. He also moonlights at a coffee shop in the evenings for about $3.80 per hour.

He says he took the dormitory job in September because he has a $770-a-month mortgage, and had been searching for full-time work for months without success. At least his commute is shorter, he said.

“There isn’t anybody who doesn’t like a high-paying job. But the economy is going downhill. I have to settle for the next best thing,” said Kang, who is 41.

Many employers that used to hire aggressively are in retreat. The property market is in a multiyear downturn, exports are weak, and local governments are saddled with debt. Government crackdowns on the private sector have led many companies to rein in risk-taking, while foreign firms, spooked by geopolitical tensions, are cutting investment in China.

Officially, the unemployment rate in Chinese cities was 5.1% in December. While that is higher than the U.S. unemployment rate of 3.7%, it is still relatively low, and better than the full-year average rate of 5.6% in 2022.

However, economists have long raised questions about China’s official unemployment report, which only covers urban dwellers, and counts anyone who works an hour or more in a week as fully employed.

Other indicators have shown more stress. Last summer, the government said youth unemployment for people aged 16 to 24 hit a record of 21.3%, then stopped releasing the numbers, saying they needed to improve the methodology. Officials came back with a new youth unemployment rate of 14.9% in December, but economists voiced skepticism about its accuracy.

Unlike the U.S., China doesn’t release updates on the number of people who are considered “underemployed,” including those who are working less hours than they want to. In 2021, it said that more than 200 million Chinese people, or nearly a third of the total labor force, are “flexibly employed” in jobs with irregular hours such as food delivery or livestreaming, but it hasn’t updated the figures.

Salary delays and benefit cuts

Anecdotal reports, private surveys and other data suggest many Chinese people are earning less than they are accustomed to, or working in jobs beneath their skills.

Average salaries offered by companies in 38 major cities fell 1.3% in the last quarter of 2023 from a year earlier, according to Zhilian Zhaopin, an online recruitment firm. The decline is the largest since the company began releasing such data in 2016.

Officially, wages are still growing in China. But after adjusting for inflation, incomes among urban households have been rising slower than China’s overall economic growth over the past five years, government data shows.

Teachers and civil servants have been complaining on social media about delayed salary payments and reduced benefits.

Li Zhe, a university lecturer in the southern city of Haikou, said the college where he works has delayed paying him bonuses for six months due to what it called budget constraints at the local provincial government.

The bonuses are an important part of his compensation. Li says he is now earning about 25% less than what he earned before the pandemic when he was working as a software engineer in Beijing. His old employer got hit hard by Covid-19, prompting him to take the university job.

“I’m downgrading spending pretty much across the board—on food, clothes, accommodation and transportation,” said Li, who moved to a cheaper rental apartment last year.

Over 1,700 strikes among workers occurred nationwide in 2023, often to protest against delayed wage payment, layoffs and factory closures, more than double the number from a year earlier, according to China Labour Bulletin, a nonprofit organization based in Hong Kong.

Migrant worker worries

Economists say underemployment is especially acute among China’s nearly 300 million migrant workers, who account for nearly 40% of the country’s total workforce but aren’t counted in the government’s urban unemployment rate. After flocking to cities during China’s boom years, many say they can’t find full-time work as China’s property bubble bursts and manufacturing jobs move to places like Vietnam and Mexico.

A study led last summer by Scott Rozelle, a senior fellow at Stanford University, found that rural residents were earning 40% less than they were in 2019. Many were working fewer days a month, according to surveys conducted among hundreds of rural workers in about 40 villages, a sign of rising underemployment in rural China, he said.

Government data suggests a less dire picture. Officially, the average income for migrant workers grew by 3.6% in 2023 from a year earlier, though that is down from a prepandemic pace of 6.9% in 2019, according to China’s statistics bureau.

Weakening wage growth is occurring at a time when some factory owners say they can’t find enough workers. Adverse demographic trends, including an aging population, are leaving some regions depleted of labor, and should in theory create favorable opportunities for workers.

Chinese leader Xi Jinping has acknowledged publicly that China needs to create more high-quality jobs. But young people also need to stiffen their spines and seek work in places that might not appeal to them, including factories, Xi, who labored in the countryside during China’s Cultural Revolution, has said.

But even when factories are hiring, they remain under pressure to keep wages low as overseas competition rises. Meanwhile, expectations for many Chinese have changed: After decades of manufacturing-led growth in China, many now aspire to jobs with less-menial tasks in service industries.

Confidence blow

Widespread dissatisfaction with the job market and depressed wage growth help explain why consumer confidence remains historically low in China, economists say. Growth in retail sales has remained weak in recent months, with Chinese shoppers skimping on goods from cosmetics to home appliances, while shifting their spending toward budget-focused retailers such as Pinduoduo.

Chinese officials have expressed deepening concern about the economic situation, and taken steps to revive growth, including cutting interest rates. Even so, many economists are skeptical that the moves will restore optimism and lead to more hiring.

If underemployment spreads, it could erode confidence and spending further. It could also slow China’s already weak productivity growth, says David Wang, an economics professor at Virginia Tech. That could happen if more people are stuck in jobs they don’t like or that don’t drive innovation, he says.

“If this is persistent, it will become very problematic for China’s economy,” says Wang.