According to the book, this “ant generation” makes up a fourth disadvantaged group in society, in addition to farmers, migrant workers, an laid-off workers. Although they have a high level of education, they can only find low-paid and usually temporary work (with no contracts or insurance), or spend their time traveling to different parts of the city for job interviews. Like ants, they’re intelligent, they live in groups, and although they’re weak individually, collectively they can wreak havoc. They’re also hardworking, and they always seem to manage to find ways around any obstacles placed in their way.

The plight of the “ant generation” seems to have stricken a chord, especially among people my age, who either know people in this situation or know that this could easily be them if they’re unlucky when the time comes to find a job. To see more on what their lives are like, take a look at these youku clips (in Chinese) here, here (where you’ll see Happy Farmer being played on a computer in a tiny apartment) and here (to see how it’s possible to eat in Beijing for just 10 yuan a day).

If lots of university graduates are working low-paid and relatively low-skilled jobs, that seems to imply that there’s probably an oversupply of university graduates. (At the same time, there’s often talk about China’s talent shortage, especially at the highest levels, but this probably has more to do with the quality of university education than the number of people with degrees). In a country that places such an incredibly high value on education, it makes sense that more people might pursue advanced degrees than the market needs, and reducing the number of degree spots would probably be incredibly unpopular.

But even if more people getting university degrees than the economy right now needs is one factor, there’s probably more at play that just that. Another possible factor is that too many people are moving to big cities after graduation, maybe because of unrealistic expectations of job opportunities in places like Beijing, Shanghai and Guangzhou, and people who are the first in their family or village to get a university education probably feel a lot of pressure to make full use of that degree. And the high cost of living in big cities is due in large part to high house prices, made worse by a possible housing bubble that has been partly fueled by government politics and the way in which the stimulus package was spent. Or maybe, like people here would likely say, 中国人太多了, and this kind of situation is inevitable in a country that has so many people.

Either way, I have nothing but respect for how hardworking Chinese people of my generation are, and I’m very grateful that I don’t need to buy an apartment in a Chinese mega-city just yet.

According to our textbook, there’s a growing group of people who spend their entire monthly income, not because they need to in order to obtain the necessities of daily life, but because they’d rather put their money into consumption that improves their short-term quality of life rather than into long-term savings. Most people in this group are apparently young people under 30, who are generally unmarried and with stable jobs.

Their spending patterns stand in sharp contrast to those of the older generation, among whom many save every penny, even when they have reached a level of financial security that should allow them to spend more money on improving their standard of living. Our book calls these two types of consumers “超前消费” and “滞后消费”， “pre-income consumers” and “post-income consumers”, and claims that they represent 12% and 26% of total consumers, respectively.

So why is there such a disconnect in spending patterns between the older and younger generations? According to the textbook, young people who spend their entire income are characterized by a high level of confidence in their job security and their future earning power. They feel safe spending their money, because they’re sure they’ll be able to make more. In addition, they see money not as a good in itself but as a means to acquiring a more comfortable lifestyle. Some might see spending money on clothes or gym cards as an investment in themselves which will in turn increase their future earning power — especially in the context of low interest rates that make savings account at the bank less attractive (and maybe a less developed system for channeling small savings into other forms of investment). More often than not, they’re young women, who presumably expect that they’ll eventually get married to someone who will hold the main responsibility for providing for the family.

On top of these reasons, I’d speculate that having parents who belong to the other extreme — parents who save every penny because they’ve lived through lives where they’ve had to, and in many cases now have pretty significant savings account that they’re fulling willing to spend on their only child — also provides a safety net that allows young people to spend their disposable income with more confidence. In other words, the 超前消费 exist precisely because the 滞后消费 exist.

The book is a few years old and it’s unclear where these numbers come from, but either way, 10-15% of consumers who spend most of their disposable income is a pretty big group of big spenders. Even if these young people are only making somewhere between 1500 and 3000 rmb a month, if a lot of these people aren’t saving any of their money, maybe live with roommates or even with their parents and don’t have any major expenses, then that could help explain how they can afford Starbucks frappuccinos and even Versace purses.

edit, 18/10/2009: I talked to my students this evening about how much they expect to make when they graduate from university, and those who were finance majors said that starting salaries in Wuhan for jobs in the finance sector are around 800 yuan per month, which might rise to 2000 yuan after two years of working. They also said that if you go to Beijing, Shanghai or Shenzhen, salaries are significantly higher, as much as 8000 yuan or more  per month for starting salaries in finance.  A few students said that they would probably continue to get money from their parents for the first few year while they’re working, and those who weren’t getting money from their parents just live extremely frugally. The 12% or so of consumers who belong to the high-spending and low-savings group clearly don’t represent everyone under 30 — it would be interesting to see a more detailed break-down of incomes and spending habits.