Archive | May 2012

“The War Against Youth” in US and China

A while back, a friend of mine posted an article from the Esquire on his Facebook titled “The War Against Youth” (in America). I got interested and had a few thoughts on the same problem in a Chinese context.

Graphic from Esquire.com

The article argued that “[n]obody ever talks about generational conflicts,” because it’s difficult to bring up. I disagree. Americans are too liberal and too vocal to shy away from bringing up anything that they think is worth arguing for. The fundamental problem of the lack of discussion in inter-generational conflicts is that people of different generations tend to think of each other as in-group members as opposed to out-group members. For instance, I would place my father within my “group” rather than an opposing group when considering things like “class conflicts.” We are much more likely to group together and fight for common interests based on race, ethnicity, nationality, and geographic regions than by age or generations. But inter-generational conflict exists. Because in general, the older you get, the more you make and the less you have to work for it.

The fact that you make more as you get older is pretty intuitive, because you build up experiences and expertise through years of work. But the proportion at which this gap exists should also make sense. Not in the US. “In 1984, American breadwinners who were 65 and over made 10 times as much as those under 35. The year Obama took office, older Americans made almost 47 times as much as the younger generation…” A jump from 10x to 47x in the span of 24 years. How did that happen? Did older people contribute more and more during this time? Or did experience become more and more valuable?

If asked which one is more important for the nation, I think most people would agree that education is of a higher priority than Medicare. But money says otherwise. “The federal government spends $480 billion on Medicare and $68 billion on education… Across the board, the money flows not to helping the young grow up, but helping the old die comfortably.” According to a 2009 Brookings Institution study, “The United States spends 2.4 times as much on the elderly as on children, measured on a per capita basis, with the ratio rising to 7 to 1 if looking just at the federal budget.” This may be caused partly by the fact that 1. it costs more to keep people alive than to put kids through school and 2. the US population is aging as baby-boomers retire.

Now let’s take a look at the lives of the young Chinese graduating from college. For their entire lives, grades have been the only thing that mattered to get to the top. The most successful students of China are the best at memorization and test-taking. Yet what lies ahead after graduation is one of the most complex and political worlds imaginable. Their skill-sets, mastery of test-taking and problem-solving, are of little to no help. But this is only one of many difficulties lying ahead for them. From education to on-the-job training, from the job markets to culture, nothing helps the Chinese youth – except maybe their parents who can and are willing to.

Education – The Chinese education system is widely acknowledged to inhibit students from developing a creative mind and face real world problems. The One-Child Policy only exacerbated the problem by allowing grandparents to treat their only grandson or granddaughter as their “bao bei” (“precious”) and not allowing them to encounter any type of hardship from childhood through adulthood. Many children from affluent families end up finding jobs through family connections, and those from low-income families with no solid connections often take up low-wage entry-level jobs in manufacturing or services. Still, with all the funding poured into education, “[a] McKinsey study found that 44 percent of executives in Chinese companies reported that insufficient talent limited their global ambitions.” To make matter worse, “According to the Chinese Academy of Social Sciences, the average college graduate earns just 300 yuan — roughly $45 — more than average migrant worker [per month],” which explains why so many rural students choose to drop out of school and begin work early rather finishing their zero-value education.

On-the-Job Training – Having experience working in Beijing, Hong Kong, and New York, I can speak to this from my personal experience – on-the-job training in China is pretty bad. How bad it is will really depend on what type of company you work for. But the point is not just a general lack of formal training programs, but also a lack of mentorship and professional developmental networks. How much people are willing to help you really depends on what you have to offer in return. This makes it very difficult for ordinary young professionals to move up because all they have to offer initially is pure physical labor. Without quickly assemble resources and figure out how to utilize everything around you, you may find yourself stuck at the bottom of the food-chain with no end in sight.

Job Market - State-owned enterprises dominate the job market; jobs at state-owned monopolies in fields like oil & gas, telecom, and financial services are among the most coveted careers in China. But they are nothing like corporations and private enterprises. In SOEs it is generally understood that the longer you stay, the more power you have and the more income you generate. But doing the most work doesn’t necessarily make you last the longest; staying out of trouble does. Therefore, there is little that a young person can do in an SOE other than to wait, and the incentives against innovation create some of the world’s largest “dinosaur companies.” Below is how an SOE entry-level employee described her situation online:

“工作,我们俩都是在国企,都是那种稳定到死的,在各自家里看来,如果要辞职就是脑子有病。在工作初期家里都是花了银子托了关系的,家里完全不赞同辞职。而且是双方家里都是这情况! 但说实话,我们俩对自己的工作都不是很满意,没什么前途,就是熬日子,国企基本都这样。”

“In terms of jobs, my boyfriend and I both work at SOEs, the most stable type possible. In the view of both of our families, we’d be retarded to quit and try something else. In order to get these jobs our families both had to pay people money and find connections, which is why they don’t agree when we told them we wanted to quit. What makes it worse is that my boyfriend and I are in the exact same situation! Honestly speaking, we are both not satisfied with our jobs, there’s no future. The only thing to do is sit there and get by the days – SOEs are basically all the same.”

Today, even lesser-known SOEs require some guanxi to get in, and the better-known ones (usually monopolies) may cost you both guanxi as well as money, as is the case above. A job at CCTV may costs you a few thousand US dollars; a job as a stewardess for Air China may be double that. That is if you already have the necessary qualifications for these positions. This shows that people would rather wait for years for higher-level income than taking any risks in the more competitive non-SOE markets.

Below, we can see that as of 2010, seven out of fifteen of the world’s largest employers are Chinese SOE’s. This is not counting the 2.3 million peopled hired by the PLA.

CNNMoney’s ranking of world’s largest employers

Cultural Reality - In my earlier post, I talked about how “[i]n the West, youth is good. Youth is energy, opportunities, and possibilities. But in China, youth is immaturity. It equates to inexperience, which to most people screams unreliability (i.e. 不靠谱).” But you can’t blame people for believing this. Younger professionals often quit without notifying his/her boss, steal corporate contacts and other confidential information, or just have a lack of commitment in general. This creates a vicious cycle when society doesn’t help young people which forces them to break more rules and make them seem even more unreliable.

The gerontocratic nature of China’s government and SOE systems is largely a matter of political legacy, and a common legacy of most states with a powerful central government. All of China’s presidents took power at age 60+, with some remaining in power until death. In comparison, Obama took office when he was 48, and no one really cares where Bush or Clinton is.

The older generation of Chinese are sitting on anywhere between 10-30 years of savings, and many receive retirement compensations at a rate of RMB1000+/month (equivalent of minimum wage at a small second-tier city in China) and enjoyed a huge boost from the housing boom if they owned any property from 2005-2009. But keep in mind that elderly people are generally married (income x2), have no mortgage (housing often taken care of by the SOEs from the communist era), lower spending habits, and money from their children, with medical care as their highest area of spending. The younger Chinese on the other hand, must pay for mortgage in post-housing-boom China (if they want to get married and move out), spend more on social and leisure activities, take care of the children’s education (a rising cost), and sometimes take care of the elderly parents.

While it’s true that when older generations pass away, they often pass down all their assets to their children (a source of conflicts in many Chinese families between siblings), but with inflation at 5-6% per annum (and far more so at the most metropolitan areas), the middle-aged Chinese are feeling squeezed, and the younger Chinese graduating from college simply see no light at the end of the tunnel. Unlike in the US, where college grads are pretty much on their own, Chinese parents are often willing to take care of their children for as long as they can.

This makes some people’s lives easier, but it creates another huge problem – the inequality of opportunities. A research paper from 2010 found that, in China, “richer parents helped a person’s prospects (a 10% increment in parental income was reflected in a 4.5% income boost for their offspring) and having parents who were employed by the state helped a lot. Parental education, on the other hand, was no help whatsoever. In these provinces, where your parent works matters more than where he went to school” (italics added).

How to End this War

A few bright spots that might materially shift the dynamics in this “War Against Youth” may be the privatization of state monopolies, the growing service industry, and the IT industry. Baidu, for example, employs over 16,000 people and with an average age of 26. There are also countless number of jobs created via various start-ups in e-commerce, social media, and other forms of online innovation.

China’s current leaders may still be under the influences from China’s turbulent past, but a commitment toward a more open society, starting from the top, may usher in a new era of explosive development through deregulation and innovation. At least that is what we hope for.

If the above sound all too serious, here’s some comedy relief. Watch this episode of Family Guy, where Chris and Meg Griffin traded place with Peter and Lois, only to realize that it’s not easy to be kids or parents, and enjoy a good laugh!

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