© Reuters. Ren Guizheng, who left Fuli mine three months ago after 30 years, stands at the door of the neighborhood furnace he now manages in Hegang, Heilongjiang Province

By Brenda Goh

SHUANGYASHAN, China (Reuters) - Anticipating millions of layoffs from bloated state-owned coal and steel companies, Chinese authorities are shunting redundant workers into jobs in farming, forestry and public services.

While this may keep unemployment rates under check, such jobs generally pay less, and could mean a step down in quality of living, reduced spending power and potentially increased dissatisfaction.

At the recent annual session of parliament China's leaders stressed that a major restructuring of the economy, stripping out excess industrial capacity, would not mean a corresponding spike in jobless rates. The government has earmarked 100 billion yuan ($15 billion) for relocating and retraining state workers over two years, but with up to 6 million coal and steel jobs to be axed those funds could be spread very thin.

"(Changing professions) is not easy," says Ren Guizheng, 54, who worked for Longmay Group, the biggest coal miner in Heilongjiang province in China's industrial northeast, for over 30 years before leaving late last year through ill health.

He says the options available to him and other workers are limited to jobs that often pay less. "All those who are changing professions went to work in sanitation or logging," he said, noting these jobs pay less than a third of the 3,000 yuan ($463.17) salary he earned each month as a miner.

Longmay has said it would cut 100,000 jobs, and local media reports say it has already relocated 22,500 workers to agriculture, timber and public service industries.

Thousands of miners from the government-owned group marched through the streets of Shuangyashan a week ago to protest against unpaid wages.

BLEAK PROSPECTS

Workers laid off from inefficient state-owned coal and steel firms will join those made redundant at private firms in struggling sectors like textiles and apparel, which are shedding an estimated 400,000 employees a year.

That risks creating a cohort of middle-aged blue-collar workers with bleak prospects in an economy growing at its slowest rate in decades. The government is pushing investment in high-tech sectors that are unlikely to need their services.

"They have expressed their willingness to learn new skills, but some are not adaptable," Heilongjiang governor Lu Hao said at the parliamentary session.

While nobody suggests the situation is as dire as in the 1990s, when street corners were crowded with state employees laid off in the name of restructuring, there are major long-term risks.

Slower economic growth means it will be harder to absorb redundant workers. Local governments in distressed regions like the northeast lack the capacity to do much more than hand them a mop or a shovel. Where workers do manage to secure new jobs, many are likely to find themselves demoted, earning less and with bleak career prospects.

"The northeast is going to have a huge problem, because there's not the job creation, there's not the new enterprises coming up that can absorb these laid-off workers," said Geoffrey Crothall, communications director at China Labour Bulletin.

"A lot of those being laid off are 40-50 years old, and nearing retirement age. It's going to be very difficult for them to find another job."

SIDEWAYS SHIFT

As China re-pivots its economy from one driven by investment and exports to one based on domestic consumption, the services sector is adding jobs at a brisk clip - but these are usually at the bottom end of the wage scale.

"The most likely result from future industrial layoffs is not a sharp increase in unemployment, but a further deceleration in household income growth," Cui Ernan, labor analyst at Gavekal Dragonomics in Beijing, wrote in a research note.

Stagnant or declining wages would be a major impediment to China's shift to a consumption-driven economy.

The average annual wage in mining in 2014 was 61,677 yuan ($9,542), compared with 28,356 yuan in farming and forestry, according to official data. Textile workers moving to restaurant and retail jobs can expect to earn around 37,264 yuan, a drop from the 51,369 yuan average pay in manufacturing.

In Shuangyashan and nearby Hegang, the consumption-driven economy looks a distant goal. Fields are dotted with heaps of unsold coal and city streets are lined with shuttered shops.

Guo Jifeng, a mine worker turned employment broker, is trying to do his bit, helping laid off workers find other jobs like assembly line work.

"I focus on unskilled workers... If you were working in a state-owned enterprise, you now have no other options," he said, adding he has helped over 100 workers resettle in the past year.

Economists say workers should instead be steered to learn higher-value skills taught by the likes of Shanghai Zhineng Fire Prevention School, a privately-run center that equips mostly mature students with building management qualifications.

"There's strong demand from the service sector. Many property and financial firms need people to help with maintenance and management," said Lu Guiwen, the school's vice principal.

But the message is slow to trickle down to the workforce.

In Heilongjiang there has been some talk of retraining, but none of the handful of workers Reuters spoke to on a recent visit were able to provide specifics.

One, who has worked for seven years at a Longmay mine, said he cared about being paid, rather than retraining.

"There's been talk about changing professions," he said, declining to give his name for fear of reprisals from the government. "I'm not clear about to what industries. That's management's problem."

($1 = 6.4640 yuan)