The truth behind China's ``16 million excess delivery workers'' problem | The limits of the employment reservoir reflected by the shift to gig workers

[Summary]

In recent years, there has been widespread talk on social media and economic circles in China that there is a surplus of 16 million food delivery workers.

This number does not simply mean that 16 million people deliver goods every day.

According to the 2024 Corporate Social Responsibility Report released by Meituan, there are an average of 3.36 million delivery drivers per month who receive at least one order per month on the company's platform. In other words, the ``16 million people'' talked about on the internet should be seen as an image of a broad labor supply that includes registered workers, dormant workers, part-time workers, and users of multiple platforms, rather than the number of actual workers.

Still, there are reasons why this statement is attracting attention.

China's food delivery industry has functioned as a ``reservoir'' of employment amid a combination of economic slowdown, real estate recession, youth unemployment, manufacturing automation, and maturation of the platform economy.

The problem is that the water reservoir is nearing its limit.

The essence of the surplus of delivery personnel is not simply that there is "too much work for external sales." Workers flock to jobs with low barriers to entry, and while experience is difficult to convert into skill assets, career development tends to stall amid algorithms and price competition.

For Japanese investors and business readers, this issue is an important observation when reading about Chinese consumption, employment, platform regulation, and AI/unmanned delivery investment.

First, how should we read “16 million people”?

The first thing I would like to confirm is how the number ``16 million people'' is handled.

Although this number is very impactful, it is not a clearly defined official statistic of ``the number of delivery workers working each day''.

When discussing, it is necessary to separate at least the following three points.

Classification	View	Actual situation
Registration/Potential population	Close to the "16 million people" statement on the Internet	Easily includes past registrants, dormant people, part-time workers, and multiple flatbed users
Monthly operating group	Group that receives orders at least once a month	Meituan announces that the average monthly paid delivery staff in 2024 will be 3.36 million people
Core working group	Full-time and semi-full-time workers who work frequently	People who tend to rely on external sales income for living expenses

If you confuse this, the story will suddenly become rough.

The understanding that "all 16 million people run through the streets every day" is probably incorrect.

On the other hand, it is also wrong to dismiss it as ``the problem is small because there are only 3.36 million people in production''.

Importantly, a huge potential workforce is increasingly flowing into platform labor with low barriers to entry. The number of flexible workers in China is estimated to be around 200 million, and new forms of work are no longer peripheral.

Rather than being a precise statistic, ``16 million people'' is closer to reality when read as a number that symbolizes the sense of surplus that has built up in China's labor market.

Foreign sales were the “reservoir of employment” for the Chinese economy

China Food Delivery Pingtai is more than just a convenient app.

Over the past decade, it has served as a safety valve for employment within the Chinese economy.

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It is easy to start working as a delivery person if you have a smartphone, ID registration, and means of transportation.

It is easy to earn cash income in the form of daily or weekly payments, and it can easily become a short-term refuge for unemployed people, young people from rural areas, white-collar workers who have left their previous jobs, and people who have failed in their personal businesses.

This has some positive aspects.

In times of economic downturn, having a place to work quickly becomes a stabilizing device for society.

However, the reservoir has a certain capacity.

While the growth in the number of orders will slow down and the average spend per customer will slow down, if the number of workers continues to increase, the number of orders and the average price per person will likely fall. Here, the ``employment absorption device'' turns into a ``low-income competition device.''

The platform economy is moving from an era of increased quantity to an era of limited quantity.

The business model for outside sales has also changed.

During the initial expansion phase, Hidai needed to increase the number of users, merchants, and delivery personnel at the same time.

The logic of this period is easy to understand.

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This is the so-called "burn capital and gain scale" phase.

Subsidies were also given to delivery workers, and it was easy to tell success stories of people earning 10,000 yuan a month.

But as the market matures, flatbed interests change.

As order growth slows down, competition becomes entrenched, and investors start looking at profit margins, Pingtai will focus on operational efficiency, delivery unit costs, subsidy reduction, and algorithm optimization.

If there is an excess of labor supply here, the bargaining power of the flatbed will be strong.

This is how it looks from the worker's perspective.

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It's not a simple story of flatbeds being bad or workers being bad.

As the market transitions from a growth phase to a maturity phase and the labor supply increases, efficiency improvements using algorithms tend to result in ``management with few escape options'' for workers rather than ``convenient ride allocation.''

What did the algorithm change?

The job of an outside courier is different from the simple delivery job of the past.

Order allocation, delivery times, late penalties, ratings, and reward calculations are built into the flatbed system.

The Chinese government also recognizes this point, and in 2021 issued guidance opinions on protecting the rights and interests of foreign delivery workers. Under the law, Hiradai is required to keep the normal labor income of delivery workers at or above the minimum wage, not to require appraisals based on the most stringent algorithms, and to set reasonable delivery deadlines.

Furthermore, the Human Resources Department's guidelines for workers in new forms of employment treat matters such as order distribution, remuneration, working hours, rest, and calculation rules as important matters related to the rights and interests of workers.

So this isn't just an online complaint.

The policy issue is that algorithmic management has become a working condition itself.

Jobs that tend to stall career development

It's not just income that exacerbates this problem.

This is stagnation in career development.

In traditional skilled trades, there are jobs where experience is likely to be an asset.

Type of work	Accumulation of experience
Welders, electricians, mechanical engineers	Years and skills are likely to have market value
Foreman/Foreman at a construction site	Experience leads to management skills and personal connections
Nursing care, maintenance, and professional services	Qualifications and work experience make it easy to transfer to the next job
Outside sales delivery	Standardized and experience is less likely to result in wage differences

Of course, delivery work also requires experience in local knowledge, efficiency, customer service, and accident avoidance.

However, these skills are difficult to accumulate as skills that are highly valued in the external labor market.

This is the tough part.

If you run for more than 10 hours a day, you might be able to earn a living. However, the longer you spend, the less free time you have for acquiring qualifications, vocational training, job hunting, and building a human network.

In the short term, unemployment can be avoided.

In the long term, the ability to move on to the next career path is diminished.

This contradiction is at the heart of the problem of an overabundance of outside delivery workers.

Treatment of the term “digital proletariat”

In Chinese-speaking countries, there is an argument that such workers are referred to as the ``digital proletariat.''

Directly translated into Japanese, it is an expression similar to "digital proletariat" or "digital proletariat."

However, if you are going to use it in Japanese economic media, it will be better to organize it as follows rather than using it as a provocation.

Workers who work on a digital platform but don't own their own data, customers, pricing, or valuation systems

Delivery workers support the infrastructure of urban life.

However, relationships with customers, order data, delivery unit prices, and evaluation rules are on the platform side. The more people work, the more data they accumulate, but this does not mean that workers themselves can freely take out their data assets.

This structure makes it difficult to move through the hierarchy.

Will AI and unmanned delivery really replace delivery workers?

The next issue is automation.

In China, demonstration and commercial trials of unmanned delivery vehicles and drone delivery are progressing. Meituan continues to develop drone delivery and autonomous delivery vehicles, and low-altitude economy has also become a policy theme.

However, it is far too far-fetched to predict that human delivery workers will almost disappear within a few years.

In reality, there are the following constraints:

Compatible with elevators in high-rise apartments
Door-to-door delivery
Bad weather
Traffic safety
Urban environment with many alleys and steps *Battery, maintenance, theft/damage risk
Laws and regulations and accident liability
Initial investment and payback period

The same goes for drones.

China Daily reports that drone deliveries operate on predetermined routes, altitudes, and designated areas, and that door-to-door delivery across cities requires infrastructure and regulatory improvements.

In other words, what will occur in the near future is not ``full replacement,'' but ``partial replacement.''

Efficient delivery zones are taken first

As automation progresses, human work will not immediately disappear.

Rather, the intervals that are easier to standardize are the ones that are more likely to be replaced first.

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It's easy for machines to run here.

On the other hand, what people tend to remain with is the troublesome and unprofitable delivery.

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Automation does not necessarily make life easier for workers.

It is possible that machines will take over the more efficient jobs, leaving humans to do the less efficient jobs.

This is the real risk.

How far has the policy progressed?

The Chinese government is taking steps to protect Pingtai workers.

The 2021 Guidance Opinion on New Employment Types of Workers raised issues such as occupational injury protection, guaranteed remuneration close to the minimum wage, rest, public announcement of calculation rules, and vocational training.

Policies for outside delivery drivers also require that flatbed companies not require the ``severest algorithm'' for evaluation, and that delivery times be set rationally.

This is important in terms of direction.

However, practical difficulties remain.

Who is a worker and who is an independent contractor?
Who pays the insurance premiums for people who work on multiple flatbeds?
To what extent can algorithm announcements be substantive?
To what extent can the decline in order price be regulated?
Can vocational training lead to an actual job change?

Creating a system and making it work in the field are two different things.

This is a pretty heavy topic.

Points that investors and business readers should look at

This issue is both a social issue and an investment theme.

There are five points to consider:

Point of view	Points of interest
Consumption	Number of orders for eating out/selling out, unit price per customer, dependence on subsidies
Employment	Youth unemployment rate, increase in flexible employment, income stability
Flatbed regulations	Protection of delivery personnel, transparency of calculation methods, social insurance burden
Profit margin	Delivery unit price, subsidies, regulatory costs, burden equivalent to personnel costs
Technology investment	Unmanned delivery vehicles, drones, low-altitude economy, delivery network automation

When looking at the real life services of Meituan and Alibaba, it is not enough to look only at sales growth.

It involves delivery worker compensation, regulatory costs, flatbed profit margins, consumer subsidies, and the competitive environment.

Outsourcing is a convenient service, but society as a whole is now at a stage where we are beginning to question how much labor costs are hidden behind low prices and high-speed delivery.

Diagram: Structure of the problem of excess gig workers in China

Summary

China's problem of having an excess of 16 million delivery workers is not just a matter of looking at the numbers.

The statement of 16 million people is not the same as the number of active workers, but should be read as a statement that indicates a sense of social surplus, including registered workers, dormant workers, part-time workers, and potential labor supply.

Still, this issue is important because multiple distortions of China's economy converge on one scene.

Economic slowdown, youth unemployment, expansion of flexible employment, maturation of the flatbed economy, algorithmic management, stagnation in career development, and investment in automation.

Outbound delivery workers are the infrastructure that supports urban life, and at the same time they are on the front lines of the structural problems facing China's labor market.

To avoid catastrophe, it is not enough to place the blame solely on Hiradai.

How to create occupational injury insurance, transparent calculation methods, minimum wages, vocational training, and the movement of labor into manufacturing, modern service industries, nursing care, low-altitude economy, etc.

If we don't take this into account, the argument that there are "too many outside delivery workers" will end up being just an internet term.

The real focus is not on how to reduce delivery staff.

It's about creating a social pathway for them to move on to their next job.

Source/Reference materials

This article is for educational and informational purposes only, based on public information. It is not a recommendation or solicitation to buy or sell any specific security or financial product. Although care is taken with accuracy, the content and future investment outcomes are not guaranteed. Final investment decisions should be made at your own judgment and responsibility.