China's Degree Glut is Creating an Overqualified, Underemployed Workforce

China's Overqualified Workforce: A Degree Arms Race with No Clear Winner

The High-Stakes Recruitment That Sparked Debate

HaidiLao, one of China's most recognizable hotpot restaurant chains, recently made headlines by recruiting food delivery workers with degrees from the country's top universities—985 and 211 institutions, equivalent to Ivy League or Oxbridge status. The job requirements? The ability to ride an electric bike and meet basic health standards for the food service industry. The offer? A salary of $980–$1,300 per month, plus an additional $170–$280 monthly stipend for degree holders.

The backlash was immediate. Social media exploded with debates about wasted talent, declining opportunities for graduates, and the broader issue of education inflation in China’s job market. Critics questioned why top graduates were competing for roles traditionally considered low-skilled. Meanwhile, defenders pointed out that HaidiLao offers clear career pathways, with management training programs designed to fast-track high-achieving employees into corporate leadership positions.

But this episode is symptomatic of a far bigger problem: China is producing more high-level graduates than its economy can absorb, leading to a glut of overqualified workers in a market that increasingly values experience over education.

The Numbers Paint a Stark Reality

In 2024, China saw a record 11.79 million university graduates enter the job market. Compare this to the country's slowing economic growth and a wave of layoffs in the tech, finance, and real estate sectors, and the result is clear—there aren’t enough high-paying, high-skill jobs to accommodate them all.

The number of master's degree holders has now surpassed the number of bachelor's degree holders in some fields, according to the Ministry of Education.
High-profile cases of PhD graduates taking low-wage jobs, such as food delivery and housekeeping, have become increasingly common.
A 2023 survey found that nearly 45% of Chinese graduates believed their jobs did not require a degree, reflecting significant underemployment.

This isn’t just a social issue—it’s an economic one. An oversupply of university graduates means companies can raise hiring standards without increasing salaries, leading to intense job market competition and stagnant wage growth.

The Degree Arms Race: When More Education Doesn’t Guarantee Success

China’s education system has long been a fiercely competitive battleground, with families investing heavily in private tutoring and exam preparation. The payoff was supposed to be clear: secure a spot in a top university, then land a stable, well-paying job. But that equation no longer holds.

Government hiring has slowed, state-owned enterprises have reduced recruitment, and private firms are increasingly favoring practical skills over academic credentials. High-flying graduates now find themselves in the same job pool as those from lesser-known institutions, with few meaningful differentiators besides their degrees.

This shift is pushing graduates to seek postgraduate degrees in hopes of standing out—but with more students following this path, the value of a master's or even a PhD is eroding as well.

Why Employers Are Raising the Bar

Some observers argue that companies like HaidiLao are simply responding to the market. With an oversupply of highly educated applicants, businesses can afford to be more selective, even for entry-level positions.

Companies benefit from this glut in multiple ways:

Higher-skilled labor at lower wages: When top-tier graduates are willing to take lower-tier jobs, businesses can maintain service quality without increasing costs.
Lower turnover: Overqualified employees may initially take these jobs out of necessity but could stay longer if given proper incentives and career paths.
Employer branding: Hiring graduates from elite universities enhances the company’s reputation, even for service-sector roles.

For many firms, the goal isn’t to keep 985/211 graduates in delivery roles forever—it’s to filter and fast-track high-potential candidates into managerial positions. However, whether these promises translate into reality remains an open question.

What This Means for Investors and Policymakers

For foreign investors looking at China’s labor market, the rise of overqualified workers signals both opportunity and risk.

Opportunities:

Expansion in vocational and alternative education: As traditional degrees lose their value, there is a growing demand for specialized training in skilled trades and digital professions.
Outsourcing and labor arbitrage: Companies can tap into a highly educated but underutilized workforce at lower costs.
Entrepreneurial potential: The lack of traditional job opportunities may push more graduates into startups and freelance work, creating new business ecosystems.

Risks:

Wage stagnation and social instability: A frustrated, underemployed graduate class could lead to increased dissatisfaction and social unrest, potentially influencing policy decisions.
Declining consumer spending: Young workers struggling with job security and income growth may spend less, impacting sectors reliant on discretionary spending.
Shifts in immigration and talent mobility: China’s highly educated workforce may increasingly look overseas for better opportunities, leading to talent drain.

The Harsh Reality: It’s a Buyer’s Market for Talent

The HaidiLao controversy underscores a fundamental shift in China’s job market: high education no longer guarantees high status or high pay. Instead, employers are using the oversupply of degrees to their advantage, raising hiring requirements without necessarily offering better salaries or career security.

For graduates, this means recalibrating expectations and considering alternative career paths. For businesses, it means access to an educated workforce at unprecedented affordability. And for policymakers, it means addressing the widening gap between educational attainment and actual market demand.

At the end of the day, the market decides. And right now, the market is telling China’s university graduates: a degree alone isn’t enough anymore.