The SARS epidemic will not affect China's economic growth in the long run. But its job market will be hardest hit.
The expansion of employment is as important as economic growth to China, if not more important. When infrastructure construction, high-tech and heavy industries are favored in economic restructuring, rapid economic growth does not mean rapid jobs growth. Sometimes, it will even reduce employment opportunities.
What economists and the government should be aware of is that SARS has had a much greater impact on employment than on economic growth.
The service industry and private sector, which have created most of the new jobs and absorbed most of the laid-off workers and surplus rural laborers in recent years, are the two parts of the economy that have suffered most.
The retail, catering, hotel and recreation industries were dealt the biggest blow from SARS. People shopped less and suspended purchases of certain items. Dining at home became popular again and left little business for restaurants. Hotel occupancy rates fell dramatically because there were fewer travelers. Discos and bars suspended operations or were even closed down.
There are about 50 million people employed in these sectors. If their total business shrank by 10 to 20 per cent, 5 to 10 million jobs would be under threat. And even if SARS could be controlled within the year, about 2 million jobs would be lost.
Tourism, real estate, construction, training and household services have also been seriously affected.
About 100 million laborers are engaged in these sectors. If these sectors earn 5 to 10 per cent less revenue, about 5 to 10 million jobs will be affected. And about 1.5 million jobs will still be cut if the epidemic is curbed within the year.
SARS has also had an impact on the transport sector. Demand for public transport diminished greatly. For example, taxis in Beijing alone saw 30 to 50 per cent less customers. A total of 18 million people are working in the transport sector nationwide. The number of jobs under pressure will be 1.8 to 3.6 million if we calculate the sector's losses at 10 to 20 per cent. The actual job cuts could be half a million.
The above shows the impact of SARS on employment.
Many enterprises will not expand their recruitment or production this year because of the epidemic, reducing the number of new jobs available.
With job fairs cancelled and normal job-seeking disrupted, new college graduates are facing a tough time this summer. The urban service sectors and building industry have also been hit, reducing the need for surplus rural laborers. Some farm workers have returned to the countryside in search of jobs.
Authorities originally predicted that 4 million new jobs would be created for urban laborers, 3 million laid-off workers would be re-employed, and another 5 million surplus rural laborers would find jobs in urban areas.
Those forecasts were based on an improving economy and smooth process of reform and restructuring.
On conservative estimates, SARS is likely to extract 500,000 to 1 million from the number of estimated new jobs.
It is clear that heavy industry, high-tech industry and light processing industry are those least affected by SARS. These capital-intensive sectors provide fewer job opportunities but contribute more to the gross domestic product (GDP). In comparison, the labor-intensive service industry and building industry contribute less to GDP growth but create more jobs.
In conclusion, if we do not pay close attention to growing employment pressures, the situation will worsen. The real reduction in the number of jobs could reach 3.5 to 4 million.
Thus the government should devise policies to cushion those industries against the impact of SARS on employment.
First, taxes on affected sectors should be reduced and government fees should be cancelled. Such measures have already been deployed in certain industries in some regions.
Second, the government should encourage people to open new businesses by relaxing regulations, lowering capital requirements, simplifying registration and approval procedures, and reducing various charges.
Third, the government should support affected industries, including various small and medium-sized enterprises (SMEs), through their financing policies. The government should loosen restrictions on guarantor companies to provide a financing bridge between enterprises and banks.
It should also push existing banks to lend more to the service sector and to SMEs, while encouraging the creation of non-State banks to cater for SMEs.
Last but not least, the department of labor should ban employers from cutting short employment contracts without good reason and from firing staff en masse during the SARS crisis.
The author is a researcher with the Party School of the Central Committee of the Communist Party of China.
(China Daily June 11, 2003)