As the implications of China’s unstable stock market continue to roll out, Eli Friedman, assistant professor of International and Comparative Labor at Cornell University’s ILR School, says that the current market instability will result in fewer new jobs in China.
Friedman says:
“Part of what is driving the current crisis is an unsustainable debt load, in large part created by investments made to prop up growth after the last crisis. So we won't see the massive investment in infrastructure projects that we saw last time, which means that there will be many fewer new jobs to absorb the unemployed.
“Construction workers are also unlikely to find work in the real estate sector, which has cooled significantly. Workers who lose their jobs in the coming months might be pretty desperate, and this could heighten social instability. Compounding the problem is that fewer migrant workers have land in the countryside that they can return to - this was a major safety valve in 2008.
“It is also unlikely that the recent devaluation of the renminbi will substantially prolong the life of many exporters, particularly for the low-end labor intensive manufacturers. Indeed, a lot of garment and electronics manufacturers have already left China, and this relatively minor devaluation is unlikely to change the strategy most producers. Manufacturers that do stay are likely to be increasingly dependent on automation rather than human labor.
“The consequence of all of this is that the Chinese economy is going to be producing many fewer jobs in the coming months and years.”
RSS