China's after-school crackdown wipes out many jobs overnight

Many thousands of Chinese are losing their jobs because of Beijing's ban on tutoring after school this summer.

Although it is difficult to determine the exact extent of job losses, data and interviews with education industry professionals by CNBC show how the abrupt policy shift is increasing pressure on Beijing to address unemployment, especially among the record 9.09 millions recent graduates.

Tutoring businesses had little notice when a harsher-than-expected policy on school-age academic courses was released in late July, banning operation on weekends and holidays, and ordering them to restructure as non-profits. This directive was intended to ease the financial burden of families who spend large amounts of their incomes on supplemental courses for their children.

Overnight, large revenue streams were lost by companies. Many employees lost their career paths. According to public disclosures, seven after-school tutoring businesses, most of them listed in the U.S.A, had combined more than 250,000 employees, both full-time and contracted.

Within weeks, the number job seekers with education and training background jumped by 10.4% from July, compared to the previous month and more than the 6.3% increase across all markets, according a report from Zhaopin.

The report found that job postings in the education industry fell, with Beijing, the capital, seeing the largest decline (49%) versus March.

Young people and women were particularly affected. According to the report, three-quarters of the education job seekers were women, and the highest increase in former educators looking for work was among those aged 25 and under.

This is especially concerning considering that the unemployment rate among 16-to-24-year-olds rose from 15.4% to 16.2% in June to 16.2% in July, well above the 5.1% nationwide rate in cities. China's National Bureau of Statistics stated last week that it does not know the exact impact of after-school tutoring policies on employment. However, they said that they would increase support for college students in finding work and starting businesses.

According to a recruiter who has over a decade's experience in finding talent for some of the largest Chinese internet companies, ByteDance, owner of TikTok, a social media app that is very popular with recent graduates, had to cut large numbers of education-related positions from kindergarten through 12th grades. For professional reasons, he requested anonymity.

Chinese media reported the news in August. CNBC was informed by ByteDance that the company's China operations had changed.

According to the recruiter, many other companies have also cut educational business segments related to school-age subjects.

According to CNBC translation, he stated that "Now this job is no longer ." He said that while IT-experienced workers can find new jobs easily, people without it are "losing their direction" and trying to become recruiters.

He stated that most of the affected workers made between 5,000 and 10,000 yuan per month ($769 to $1538).

According to official data, this is well above the monthly average wage of 4,811 Yuan for workers in privately-owned companies located in cities. China's wages vary by region and industry.

The recruiter stated that it is a "real rush" for these educators to find new jobs because corporate severance plans depend on years of experience. Many laid-off workers may only receive a few months' pay if they are not forced to quit.

According to a local Chinese media article, a branch of U.S.-listed Zhangmen Education gave approximately 100 employees notice of its layoffs and paid them only a few weeks. The article also mentioned resignations and layoffs at four other locations including Shanghai.

Zhangmen's shares plunged 70% after going public on New York Stock Exchange in June. CNBC did not receive a request for comment from Zhangmen.

The number of tutoring companies after school grew quickly over the past few years. Some models were boosted by the demand for online education following the coronavirus pandemic.

The U.S.-listed industrial giants TAL and New Oriental Education and Technology Group revealed a surge in new hires last fiscal year, numbering in the tens or thousands. Their stocks plunged nearly 90% in the past year after the regulatory crackdown.

These tutoring companies and four others revealed that they had combined more than 250,000 contract and full-time employees.

CNBC did not receive a response from the companies -- TAL and New Oriental, Gaotu Zhangmen, Spark Education. Zuoyebang, Spark Education. 17EdTech.

These figures are only a small portion of the industry. There are many large and small businesses that don't disclose their headcount.

According to a report by Beijing Normal University and TAL Education, the entire kindergarten-high school education service industry accounts for approximately 10 million jobs in China.

According to Liu Xiangdong (deputy director of the economic research section at the China Center for International Economic Exchanges based Beijing), the new policy could affect around a third of these positions.

According to a CNBC translation, he stated that "This policy adjustment has certainly had an impact on some employment flows."

According to his research, he said that the government and businesses are offering some assistance and that large industries such as manufacturing have many job vacancies. Liu stated that the government must improve the training of workers and businesses to ensure the economy grows longer-term. Graduates will also need to expect lower salaries in order to be successful.

According to MyCOS, a Chinese higher education consulting firm, elementary and middle school education has surpassed finance in the top three most desirable industries for college graduates.

According to the report, the average salary of students who graduate with a bachelor's degree was 5,440 Yuan per month in 2019, nearly double the average of 2,815 Yuan in 2010.

The growth of technology-driven companies, including education ones, is a major reason for the rise in salaries.

According to the Beijing Normal University report and TAL Education report, between 2013 and 2019, 14.5 billion yuan was invested in projects that combined education and artificial intelligence.

The K-12 segment attracted the highest amount of money out of all categories -- 7.8 billion Yuan. This report noted that many companies went public in the U.S. or Hong Kong, where they could raise more money from the public.