Is China Overeducated?

As you all know, I pay a lot of attention to matters about education, especially about education in China. New York Times today has an opinion piece about the China's college education. The discussion revolves around a fact that while the average salary of the low-end, migrant workers is on the rise, the salary and employment perspective for highly educated college graduates are stagnated. Apparently, the shortage of low-skilled factory workers and the over-supply of knowledge workers are co-existing in China.

I've been noticing this issue for a while myself. The eye-catching, double-digit growth of China's economy does not seem to generate enough high-end job opportunities. There are many possible reasons behind the problem, as the commentators in the NYTimes put it. The fundamental reason behind this problem, in my opinion, lies in the lack of a sizable knowledge-based economy in China.

The magical rise of China's economy, however the nationalism folks beautify it, is due to the immense supply of low cost, low-skilled factory workers pressing a button, making low-tech, low-margin products for oversea markets. It just happens to be that the volume is so big that makes China's economy seems to be something. But if you calculate the productivity of an average Chinese worker (the value created per worker per hour), it's not much different from our other friends in the developing world. You might argue that, there are a lot of white-collar elites working in skyscrapers in Beijing, Shanghai and etc.. Doesn't it means that China has an advanced economy as well? Well, yes and no. The white-collar jobs in the major cities are mostly from multinationals, which are creating value for foreign companies. Secondly, the amount of white-collar jobs created, even counting multinationals, is still far behind the number of new college graduates each year. Sooner or later, China's job market will be filled with an over-educated and underemployed workforce.

Parents from China must be puzzled watching their only child, who was given the best possible resources affordable by the families, makes only a few hundred bucks more than a migrant worker after they graduate from colleges. It's simple supply and demand relationship. As the standard of living in China rises gradually, less young people are willing to work a factory job. But China is still the biggest factory of the world. So the demand for factory workers increases. Because China is still enjoying the low-cost, short-term profiting from low-end manufacturing, thanks to the still relatively large supply of cheap labors, little motivation is felt by the private sector to invest in more advanced, more knowledge-intensive products and services. Therefore, there aren't that many jobs in China that really require a college degree to accomplish.

In order to escalate, or unleash the productivity of China's workers, China needs to upgrade its economy to require more knowledge, and hence, more people with knowledge. The recent rise in factory salary, and the appreciation in RMB value, could be driving force towards that goal. Some might argue that, the Chinese government is investing heavily in research and development, and there are high-speed rail-ways being built. What are you talking about that China doesn't have a knowledge-based economy. Well, short answer is, not enough. The majority of the government investment went to academic institutions which don't hire many. Little went to the private sectors. In fact, there are not enough private companies that have research divisions in China that would form a critical mass of hiring force for college-educated people. The reasons why China's private sector under-investing in research and development are due to the lack of expertise and most importantly lack of an intellectual properties protection system. When it's easier and more rewarding to copy other people's products than inventing your own with little risk, the choice is obvious. In one of my past writings, I talked about how to improve the innovation environment for China's private sector. There's also argument that the lack of innovation in China is due to the stifling political climate, such as the lack of free press, free speech, and true academic freedom. I agree that they are all fundamental to innovation. But by putting a strong IP legal system in place, I believe that even a communist China can innovate as well, at least to some degree.

Finally, I don't agree with some arguments that China's education systems are generating useless college graduates with obsolete textbook knowledge, and therefore they are under-prepared for a creative and innovative economy. I've known that the Chinese people have been one of the most adaptive people on earth. If the economy needs them to innovate, trust me, they will.