The most educated generation in China’s history was supposed to blaze a trail toward a more innovative and technologically advanced economy. Instead, about 15 million young people are estimated to be jobless, and many are lowering their ambitions.

A perfect storm of factors has propelled unemployment among 16- to 24-year-old urbanites to a record 19.3%, more than twice the comparable rate in the U.S. The government’s hard-line coronavirus strategy has led to layoffs, while its regulatory crackdown on real estate and education companies has hit the private sector. At the same time, a record number of college and vocational school graduates — some 12 million — are entering the job market this summer. This highly educated cohort has intensified a mismatch between available roles and job-seekers’ expectations.

The result is an increasingly disillusioned young population losing faith in private companies and willing to accept lower pay in the state sector. If the trend continues, growth in the world’s second-largest economy stands to suffer. The sheer number of jobless under-25s amounts to a 2% to 3% reduction in China’s workforce, and fewer workers means lower gross domestic product. Unemployment and underemployment also continue to impact salaries for years-a 2020 review of studies reported a 3.5% reduction in wages among those who had experienced unemployment five years earlier.