Multinationals Can Build a Lean, Mean Staff on China's Grad Glut

Tickers in this article: BIDU DIS GOOG NTT
TAIPEI ( TheStreet) -- Every multinational corporation that wants to keep up in the world sells to the Chinese or manufactures in China. A billion consumers. Economic growth of at least 7.5%. Yada, yada.

Those MNCs also need to hire good people in China. But according to state media reports and a survey by the Chinese Academy of Social Sciences in December, just three-quarters of 2012 college and university graduates had found work at all. Those reports say too many new grads were out there hunting for the top jobs.

Grads have groused about gluts in their ranks for a decade. In 1999, universities that were once super-competitive relaxed admission rules to accommodate increasing numbers of applicants. Admissions rose 41.2% that year to 1.59 million students, who started to put on the caps and gowns around 2003.

During China's 2012 college entrance exam season, about 9.15 million high school students vied for 6.85 million higher education slots, the country's official Xinhua News Agency said. The number of job-seeking graduates would grow at an average of 3% annually through 2015 period, adding seven million to the talent market.

That means about 25 million city dwellers need jobs, while the market creates just 12 million new positions for them every year, the news agency adds.

If this pool of would-be workers is overflowing, I'd bet my resume that foreign firms get to be pickier, for now, about those they hire, and without major pay increases.

MNCs have offered the most plum jobs in China since the 1990s, with salaries well exceeding Chinese-run private firms. Government jobs remain popular as well, though more for their stability -- little risk of layoff -- than for the package.

Beleaguered job seekers will settle for anything over the national average determined mostly by Chinese firms, while MNC bosses can raise the performance bars at the same time with low risk that someone will walk off the job.

Incidentally, we're talking about salaries of 10,000 yuan ($1,603) per month at the very high end, still less than equivalent jobs in more developed countries. Typically employees, especially entry-level, earn not even half that amount.

To look at this dynamic in another way, consider the opposite trend in Vietnam. Talent is hard to find in much of the country, foreign companies complain. Those in jobs are pressing for higher pay, often by calling wildcat workplace strikes that shut down production until workers and managers work something out.

In China, a widely forecast economic slowdown last year from levels between 9% and 10% over the previous decade should give foreign employers another boost. Chinese officials warned in 2012 of "increasing employment pressure" for graduates because of that slowdown, from more than 9% to around 7.5%.