Labor Market Issues in China: Volume 37

The economic reform started in 1978 progressively pushed China into one of the largest market-oriented economies in the world. The reform also triggered substantial transformations in the labor market. The labor surplus generated by increased productivity in rural areas, together with the growth in labor demand driven by export-oriented sectors in urban areas, contributed to the largest movement of workforce in history. The rural-to-urban migration currently taking place is substantially contributing to the sustained economic growth of China – especially of its cities – but also raises important issues about segregation and inequality in the urban labor market. In contrast, migration has also significant consequences for the individuals left-behind in rural areas. How economic conditions in sending households and villages are affected by the remittances sent by migrants, or by their return from the cities, is crucial for assessing the benefits of migration. The gradual decline of state-owned companies and the rise of the private sector emphasize on the one hand the consequences that labor reallocation has on the occupational mobility of the workforce and on the other the crucial role that entrepreneurship will have in the future development of China. Pulled by economic growth, investments in education have substantially increased especially in urban areas, posing challenges on how skills can be efficiently allocated in the labor market. In the background, reforms of the welfare system have slowly started to take place. One clear challenge is how the social insurance and pensions system can be transformed into one that is more compatible with a market economy. Another issue will soon be its sustainability, considering the imminent shrinking of the labor force caused – among other things – by the one-child policy.

Can having more education than a job requires reduce one’s chances of being offered the job? We study this question in a sample of applications to jobs that are posted on an urban Chinese website. We find that being overqualified in this way does not reduce the success rates of university-educated jobseekers applying to college-level jobs, but that it does hurt college-educated workers’ chances when applying to jobs requiring technical school, which involves three fewer years of education than college. Our results highlight a difficult situation faced by the recent large cohort of college-educated Chinese workers: They seem to fare poorly in the competition for jobs, both when pitted against more-educated university graduates and less-educated technical school graduates.

This paper explores the rural labor market impact of migration in China using cross-sectional data on rural households for the year 2007. A switching probit model is used to estimate the impact of belonging to a migrant-sending household on the individual occupational choice categorized in four binary decisions: farm work, wage work, self-employment, and housework. The paper then goes on to estimate how the impact of migration differs across different types of migrant households identified along two additional lines: remittances and migration history. Results show that individual occupational choice in rural China is responsive to migration, at both the individual and the family levels, but the impacts differ: individual migration experience favors subsequent local off-farm work, whereas at the family level, migration drives the left-behinds to farming rather than to off-farm activities. Our results also point to the interplay of various channels through which migration influences rural employment patterns.

While there is evidence that return migration promotes entrepreneurship and self-employment of those who migrated, previous studies have not focused on whether migration provides the same benefits to individuals who did not migrate. Using a unique dataset that provides information on both current and return migrants in rural China (RUMiC), we investigate the impact of migration on entrepreneurship among individuals with no migration experience. We explore the self-employment choices of individuals who live in households with return migrants and individuals who live in households that have migrants currently in the city, comparing them with individuals living in non-migrant households. Our methodology allows us to control for the potential endogeneity between the migration and self-employment decisions. The results show that return migration promotes self-employment among household members who have not migrated. However, left-behind individuals are less likely to be self-employed when compared with those living in non-migrant households.

This paper examines the gender patterns of occupational mobility in post-reform urban China using a national representative dataset. The results show there are marked gender differences in both direction and self-reported cause of occupational mobility. With respect to the direction of mobility, married women are more likely than married men to undergo downward occupational changes, but are less likely to experience upward moves. In terms of the cause of mobility, compared to married men, married women are less likely to change jobs for career development or move to a new job assigned by the employer, but are more likely to change jobs for family reasons or as a result of involuntary separation. The results also show that the public-sector restructuring has increased the incidence of downward occupational mobility, more for women than men. The analysis suggests that women are disadvantaged in the occupational mobility process by a variety of social and institutional factors.

This paper first reviews the history of social insurance policy and coverage in urban China, documenting the evolution in the coverage of pensions, medical and unemployment insurance for both local residents and migrants, and highlighting obstacles to expanding coverage. The paper then uses two waves of the China Urban Labor Survey, conducted in 2005 and 2010, to examine the correlates of social insurance participation before and after implementation of the 2008 Labor Contract Law. A higher labor tax wedge is associated with a lower probability that local employed residents participate in social insurance programs, but is not associated with participation of wage-earning migrants, who are more likely to be dissuaded by fragmentation of the social insurance system. The existing gender gap in social insurance coverage is explained by differences in coverage across industrial sectors and firm ownership classes in which men and women work.

China’s new rural pension program (NRPP), a fully funded defined contribution plan among the rural residents with heavy government subsidy toward contributions, has expanded rapidly since its introduction in 2009, and is expected to achieve universal coverage by the end of 2012. Empirical evidence, however, shows that although those close to pension eligibility age are enthusiastic, take-up rate is low among younger people, and participants tend to choose plans with the least contribution requirements, threatening the long-term viability of the program. We calculate the net benefits of participation on behalf of rural residents and demonstrate that poor designs are responsible for these problems. A proper rate of return on individual investment is not only essential for encouraging participation and ensuring a higher replacement rate but will also require less government subsidy and relieve fiscal burdens on the government.