China's Workforce in 2015: Better Trained, Better Paid, Better Protected?

According to a new report from The Conference Board, China’s Twelfth Five-Year Plan (FYP), encompassing 2011–2015, signals a new focus in the country’s development on “human factors” — from improving education to boosting consumer spending and reducing inequality. Reading the Tea Leaves: The Impact of China’s Twelfth Five-Year Plan on Human Capital Challenges investigates the latest FYP, finding strategic planning and program implementation lessons for multinational corporations preparing for the Chinese economy and Chinese workforce of the future.

“As compendiums of official policy, modern Five-Year Plans sprawl across dozens of state agencies and the gamut of thinking — retrograde, mainstream, vanguard — within the Party,” said Anke Schrader, an author of the report. “The Twelfth FYP can therefore seem opaque and even contradictory. But beneath the competing viewpoints and confusing rhetoric there is a picture of the country’s demographic, legal, and social direction that human capital executives need to understand.”

Schrader and her co-authors, Amy Lui Abel and Xiaoqin Li, examined the Five-Year Plan and referenced 26 related policy documents released by the Central Committee of the Communist Party of China (CPC), the State Council, the Ministry of Human Resources and Social Security, the Ministry of Education, and other government agencies. Among the key findings of Reading the Tea Leaves:

• An aging workforce. China appears committed to maintaining its strict family-planning policies, keeping population growth well below world and Asia averages. Executives must thus plan for a rapidly aging population, with a particular reduction in the number of young workforce entrants in low-skilled basic manufacturing and basic service jobs.
  
• Stable employment conditions remain a top priority. To address predicted labor market needs, many Twelfth FYP programs focus on creating urban industry and service jobs and shifting workers out of agricultural jobs. Companies will need to carefully monitor short- and medium-term employment trends and urban–rural migration patterns to draw reasonable conclusions on labor supply, especially given the lack of good quality data in this area.
• Serious about education? Increased education spending is one of the centerpieces of the Twelfth FYP. A deeper issue, however, may be talent “mismatch”: a mass of workplace entrants lacking many of the skills — in critical thinking, creativity and innovation, collaboration and teamwork, and professionalism — to match their credentials. To this end, the Twelfth FYP prescribes aggressive teacher-education targets. But international employers should continue to take a more direct role in partnering with local educational institutions to shape curricula toward real-world business needs.
• Hard targets for social welfare. The Twelfth FYP proposes a considerable overhaul to China’s byzantine and often inadequate social safety net. Multinationals should expect mandatory costs to rise for pensions, healthcare, and social insurance programs; they may also consider proactively offering private plans as a way of attracting top local talent.
• Labor law tilting towards workers? As a corollary of the emphasis on wages and social welfare programs, The Twelfth FYP calls for expanding the coverage of signed labor contracts and collective bargaining agreements. Human capital practitioners should begin preparing for stronger oversight of hiring, firing, compensation, and arbitration processes — with a potential of increased lawsuits.

As Reading the Tea Leaves emphasizes, understanding China’s Five-Year Plans is often more art than science, requiring a sensitivity to where party, state, and nation have been to feel out where they’re headed. The report offers outsiders a first key to deciphering Chinese trends.

“As anywhere else, China’s policy reflects a cacophony of rival interests, ideas, and beliefs,” said Abel. “But the reams of documents making up the Twelfth Five-Year Plan nonetheless offer a roadmap to the next half decade of Chinese development — if you know where to look.”

“In today’s China, pragmatism rules — both in individual careers and as a matter of state policy,” added Li. “This means the most pragmatic elements of the latest FYP are the ones most likely to direct priorities, in most parts of the country. It also means human capital leaders and other executives dealing with locals — whether business partners, labor authorities, or top policymakers—will be most successful when they appreciate these priorities, and align their own interests with them.”