A Corner of Transformation: The Major Changes in Employment Population in China Over the Past Five Years

From 2018 to 2023, China experienced three years of continuous pandemic and a downturn in the real estate sector, entering a new round of economic transformation. The results of the fifth national economic census (2023 data) released by the National Bureau of Statistics on December 26 provided us with a new perspective to review the economic changes over the past five years.

The changes in employment are a result of industrial transformation. There are two changes in employment: first, the total employment population has continuously flowed from the secondary industry to the tertiary industry; second, employment in the manufacturing sector has shifted from labor-intensive industries to technology and capital-intensive industries.

The tertiary industry is the main force absorbing labor. In 2023, the number of employees in the tertiary industry [1] legal entities + individual businesses reached 410 million, an increase of 81.269 million compared to 2018. The share of the tertiary industry in non-agricultural employment is 67.6%, an increase of 5.6 percentage points compared to 2018.

The number of employees in the secondary industry decreased by 5.269 million compared to 2018, down to 197 million, with its share in non-agricultural employment declining by 5.6 percentage points to 32.4%.

The lost employees in the secondary industry mainly came from the construction and mining industries, which saw net outflows of 6.804 million and 1.279 million employees, respectively, compared to 2018.

The significant decline in construction employment is easy to explain, as real estate development has entered a downturn in recent years; the decrease in mining employment may be related to advancements in mining technology and increased industry concentration.

Employment in the manufacturing sector increased by 2.089 million compared to 2018, but there was a clear divergence in the flow of personnel. Labor-intensive industries, represented by textiles and clothing, saw a significant reduction in employment.

The number of employees in the textile and clothing industry, textiles, leather, fur, feathers and their products, and the footwear industry decreased by 1.33 million, 872,000, and 677,000, respectively, compared to 2018. The combined share of these three labor-intensive industries in manufacturing employment declined by 2.8 percentage points to 10.3%, the most significant drop among all industries.

Technology and capital-intensive industries absorbed more new employees. The number of employees in the metal products industry, general equipment manufacturing, special equipment manufacturing, and electrical machinery and equipment manufacturing increased by 1.148 million, 855,000, 815,000, and 792,000, respectively, compared to 2018. The combined share of these four industries in manufacturing employment increased by 3.4 percentage points to 28.5%, making them the main force in absorbing labor in manufacturing.

The tertiary industry is the main force in absorbing labor. The sectors providing the most jobs are wholesale and retail, leasing and business services, and accommodation and catering, with 140 million, 40 million, and 30 million employees in 2023, accounting for 22.3%, 7.2%, and 5.6% of non-agricultural employment, respectively. The fastest-growing sectors for new jobs are wholesale and retail, leasing and business services, information transmission, software and information technology services, and scientific research and technical services, which added 30.98 million, 18.19 million, 6.17 million, and 5.802 million employees over the past 5 years, cumulatively absorbing 80.4% of the new jobs created in the past 5 years.

Labor-intensive service industries have become the main force in absorbing employment, corresponding to a decline in the potential growth rate center. From the perspective of per capita GDP, in 2023, the per capita GDP added value for manufacturing employees was 268,000 yuan, while the per capita GDP added value for employees in wholesale and retail, and leasing and business services was only 91,000 and 101,000 yuan, respectively.

However, a decline in potential growth does not mean a decline in efficiency. In fact, the efficiency of both manufacturing and service industries is improving.

The efficiency of manufacturing is reflected in the increase in per capita output. Data from the fifth national census shows that the per capita revenue level in manufacturing rose from 1,003,000 yuan to 1,251,000 yuan. Even with a decline in the number of employees, industry revenue can continue to rise. For example, in the mining industry, the per capita output of coal mining and washing rose from 773,000 yuan in 2018 to 1,335,000 yuan in 2023, while the per capita output of black metal mining rose from 917,000 yuan in 2018 to 1,650,000 yuan in 2023.

The efficiency of labor-intensive service industries is reflected in the creation of jobs from scratch. The wholesale and retail, and leasing and business services sectors have absorbed 64.7% of the new employment population in the past 5 years, mainly benefiting from the development of e-commerce logistics and internet platform economies, which have lowered the entry barriers for many industries, becoming the largest destination for agricultural population and migrant workers seeking employment.

From the migrant worker monitoring survey report, it can be seen that the proportion of migrant workers engaged in construction has decreased from 18.6% in 2018 to 15.4% in 2023, while the proportion of migrant workers engaged in wholesale and retail has increased from 12.1% in 2018 to 13.2% in 2023. Resident services, repair, and other service industries are also major new employment destinations for migrant workers Although the total factor productivity of these labor-intensive service industries is relatively low, for example, the total factor productivity of wholesale and retail is 2.5, it is still higher than that of the agriculture, forestry, animal husbandry, and fishery industry and the construction industry, which are 0.2 and -2.4 respectively. Therefore, from an economic perspective, the overall production efficiency of society is still improving.

Of course, the service industry that absorbs employment is not limited to labor-intensive services. In the past five years, the information transmission, software, and information technology service industry, as well as the scientific research and technical service industry, have added a total of 11.968 million employees, accounting for 15.7% of the new employment.

These two industries have absorbed a large number of high-tech talents, with higher total factor productivity. The total factor productivity of the information transmission, software, and information technology service industry is 13.6, higher than that of all other industries, while the total factor productivity of the scientific research and technical service industry is 5.9, ranking among the top in various industries.

Finally, one point that needs attention is that the census data shows that in 2023, the number of employees in the tertiary industry (legal entities + individual businesses) is 420 million, which is 59.52 million more than the 360 million employees in the tertiary industry published by the National Bureau of Statistics.

The difference in data may come from differences in statistical criteria. The annual data from the National Bureau of Statistics is based on estimates from census and labor survey data, while the census data conducts a "carpet-style" investigation of all legal entities, industrial activity units, and individual businesses engaged in secondary and tertiary industry activities within the country. In this case, some hidden employees (such as a portion of flexible employment workers) are also included in the census scope, resulting in a higher employment number.

Author of this article: Song Xuetao S1110517090003, Sun Yongle, Source: Xuetao Macro Notes, Original Title: "A Corner of Transformation: Major Changes in Employment Population (Tianfeng Macro Sun Yongle)"

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