On The Adjustment Of The Graduate Employment And Wage After Higher Education Expansion In China

Under the influence of convincing conclusions achieved by the human capital theory and the endogenous economic growth theory,many countries come to expand the higher education output in the different historical time. It has been more than ten years since the higher education begins in China in1999. In order to achieve a proper knowledge on China's graduate employment and clarify the misunderstanding to the graduate employment problems,it is initial and primary to examine the present state of China's graduate labor market objectively,scientifically,deeply and correctly. Without the base of the objective examination results,it is impossible to find fundamental cause of the present market result,to deeply discuss the likeliness of improving the present result,and to propose constructive and catering strategies and suggestions.The article begins with analysis based on simply supply and demand principles,concludes that increase of the relative supply caused by higher education expansion may lead to different market result. Suppose demand to be unchanged: 1. If the market is completely flexible,supply increase,ceteris paribus,leads to an increased employment and decreased wage at the equilibrium; 2. If the market is completely inelastic with typical unbalanced characteristics,supply increase,ceteris paribus,leads to an increase of graduates unemployment. Suppose demand to be changed: 1. if the market is completely flexible,supply increase,ceteris paribus,still leads to an increased employment,but the result of comparing the Ex-ante and Ex-post equilibrium wage is uncertain. Whether the Ex-post equilibrium is higher than the Ex-ante is uncertain,decided by the degree of the change of demand relative to supply,but it is certain that the Ex-post equilibrium wage resuming a changed demand must be higher than that with an unchanged demand assumption. 2. If the market is completely inelastic with typical unbalanced characteristics,there exist three possible market results: supply is still surplus over demand; supply is equal to demand; supply is deficient to demand.In order to examine the conclusion drawn by the above theoretical analysis,the article employs the econometric methodology to examine the return to education in China and graduate employment probability respectively. The econometric result shows: compared with the pre-expansion,China's return to education keeps decreasing,but employment probability rebounds high and fast from the low level immediate after expansion. The very econometric result is in very accord to the first case of supply and demand analysis,which assumes demand as to be unchanged and the market as to be completely flexible. According to market supply and demand analysis,if the demand is unchanged and the market is flexible,increased supply will increase the equilibrium employment and decrease the equilibrium wage under the condition of ceteris paribus. The counterpart econometric proof is that the employment probability increases after a sudden decline and the return to education keeps a tendency of falling.After investigating the case of American graduate labor market adjusted to the higher education expansion and comparing it with China's case,it is found that the two markets react the same way in the first period,but differently in the second period when higher education is expanding. In the initial three or four decades of expansion,the graduate labor market in America shows tendency of declining return to education same to the present China's graduate labor market. However,in the recent 30 years,although the higher education continually expands even at an accelerated pace in America,the return to the education stops falling and rebounds up steadily and fast. In the first period,American market reacts in the way explained in the first case of the above supply and demand analysis which assumes the demand to be unchanged and the market to be flexible. In the second period,American market reacts in the way explained in the case of the above supply and demand analysis which assumes the demand to be changed and the market to be flexible. It shows that increased demand is the root cause of different market results. The question is,why the demand increases in American market? Is the increased demand endogenous and exogenous?In order to answer the question above,the article,based on the analysis with Acemoglu model,concludes: the sudden increase in the relative supply of graduate labors first do leads to the decline in the relative wage between graduate labors and non-graduate labors. But the decline is not the final equilibrium result. The sudden increase in the relative supply of graduate labors will increase the demand of final goods firms with the decreased relative wage,further increases the demand of technology which is complement to graduate labors and called skill biased technology. The enlarged demand and market of skill biased technology improves the incentives of R&D activities on skill biased technology. As a result,the technology development on the BGP (balanced growth path) is directed to be complementary to graduate labors,which further increases the demand of graduate labors by goods production firms,makes the demand curve shift to the right side,and raises the equilibrium relative wage that may even be higher than the original point under certain circumstances.This model offers a very convincing explanation to what happens in the American labor market. The following questions arise: how to explain what happens in China's Labor market. May the falling relative wage of graduate labors be an inevitable temporary period on the course of adjustment to the final general equilibrium?The answer is negative. The reason is that different constraint conditions result in different market equilibrium results. A principal conclusion drawn from the present constraint conditions in China's economic development is the present state with low return to education is very likely to have already been the market equilibrium result. Without changing the present constraint conditions,the equilibrium will not be changed.Obviously,the current market equilibrium is not optimistic result,for continuing accumulating human capital,instead of producing technological development and industrial structure upgrading,would rather be likely to create the education-caused poverty and make the problem of the poverty transmission through generations even more severely. Is it possible to change the unpleasant result?According to the analysis to China's present economic development,it is shown that if some institutional arrangements are changed,a better market equilibrium is very likely to be realized. These institutional arrangements include: hardening the budget constraints of higher education institutions through the reform to the property fiscal institutions and regulations in order to realize the diversified supply produced by higher education institutions; creating a healthy macro-environment for the enterprises under the hard budget constrain conditions to compete sound and fair,through perfecting property right protecting and financing institutions,providing adequate incentives for starting new business and innovation,promoting technological advance to be formed autonomously according to market demand,and finally constructing a benevolent circle including income growth and upgrading industrial structure in economic society.To draw a conclusion,investigation and analysis on China's graduate labor market show that: expanded higher education will not necessarily lead to difficult graduate employment; the difficulty of graduate employment does not lies in being unable to find a job,but lies in being unable to find a job with higher income; the starting point of a fundamental change to the market equilibrium result with low educational return is to form incentive of diversifying supply of graduate labors and arrange proper property right institutions to form efficient demand.