TURNING EDUCATIONAL GAINS INTO PRODUCTIVE JOBS
China has made a striking educational expansion. Its tertiary enrolment rate more than doubled from 29 per cent in 2012 to 77 per cent in 2024, while around half of people aged 20 to 24 attend university or vocational college. This expands the supply of highly educated workers. The harder question is whether those educational gains translate into productive jobs.
The increase in graduates will raise productivity only when firms can use their skills to produce the goods and services customers want. A degree adds little to output if its holder cannot find suitable work or spends years competing for a narrow range of coveted positions.
The popular term “involution” captures this intensifying competition where greater effort produces diminishing returns. This feeling of frustration is especially visible among China’s younger generation who compete intensively for education, jobs, housing and social mobility.
China’s challenge is to shift from just producing more college graduates to using their skills more effectively.
This is partly a question of where capital goes. Years of state-directed investment have left debt and excess capacity in some sectors, while potentially more productive businesses need room to expand. Reducing barriers in services and providing a more level playing field for firms would allow investment and workers to move towards activities with higher returns.
Expanding services can also employ graduates and meet rising domestic demand. It also means allowing successful businesses to grow rather than keeping finance and workers tied to projects with weak returns.
It is also a question of demand. When households are reluctant to spend, firms have less reason to hire and innovate for the domestic market – and exports alone cannot absorb every new graduate or sustain China’s growth indefinitely.
Stronger social protection and household consumption would create markets for better services, while more open competition would reward firms that use skilled workers effectively.
China’s successes in advanced manufacturing show that its trained workforce can support innovation. The challenge is to spread those gains across more firms and sectors rather than assuming that a few leading industries can employ all its graduates.