State Council issues policies to support job creation

On Wednesday, the State Council General Office published updated policies to support job creation.

• The policies have arrived just in time for the summer graduation season, which sees a record high 12.2 million graduates set to enter the labor force (China Daily).

What’s new:

• Firms that retain employees will enjoy a larger rebate on funds paid into the unemployment insurance fund – 90% for small firms and 50% for large firms, up from 60% and 30%, respectively.
• Subsidies from the youth hiring scheme will be paid out faster and more efficiently

Some context: The youth hiring subsidy – introduced in 2022 – provides a one-time RMB 1,500 subsidy for each newly recruited worker aged 16-24.

The new policies also pledge support to firms that employ workers from “key employment groups.”

• Small and micro enterprises in certain sectors that sign one-year contracts with workers from “key employment groups” – such as recent graduates – will receive funding equivalent to 25% of the employee’s individual social insurance payment.
• This subsidy must then be paid out to the employees.

Get smart: These employment support policies are lame.

• For one thing, they are administratively complicated – companies must satisfy size, sector, and employee demographic requirements.
• Meanwhile, the 25% social insurance rebate for small and micro enterprises must be paid out to employees, reducing the financial incentive for employers to participate.

The upshot: Youth unemployment will surge in the coming months.