MIGRANT WORKERS AND ECONOMIC GROWTH IN

CHINA

Slides courtesy of:

Prof. Andrew Watson

University of AdelaideLecture 10: Economic Development

Structure of Lecture

1. Background on development model before 1978

2. Reform and opening

3. Rural-to-Urban migrants in China

4. Social Consequences and sustainability

1. BACKGROUND

• Centrally planned economic growth

• Planned distribution

• Priority for industry

• Controls over labour

• Household registration and the dual population

2. REFORM AND OPENING

1. Opening• Foreign trade, FDI, foreign aid

2. Reform• Reducing planning• Introducing markets

3. Rural Reform• Land contracting• Free markets• Liberalisation of labour controls

Reform Outcomes

• Comparative advantage in labour-intensive manufactures

• Relative decline of agriculture

• Growth of informal sector

• Urbanisation

• Reduction in rural poverty

Economic growth 1981-2002(Source: World Bank, China: Promoting Growth with Equity, 2003)

GDP and employment growth 1978-08(Source: Li Shi, Beijing Normal University)

0. 0

200. 0

400. 0

600. 0

800. 0

1000. 0

1200. 0

1400. 0

1600. 0

1800. 0

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

GDP growth

Empl oyment growth

Changes in employment structure 1978-08(Source: Li Shi, Beijing Normal University)

0. 0

10. 0

20. 0

30. 0

40. 0

50. 0

60. 0

70. 0

80. 0

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Pr i mary

secondaryTer t i ary

%

Changes in employment structure 1978-08(Source: Li Shi, Beijing Normal University)

0

20

40

60

80

100

120

140

160

1989 1993 2001 2002 2003 2004 2006 2008

mi l l i on

year

number of rural mi grant workers, 1989-2008

3. DEFINING MIGRANT WORKERS

• Basis in the household registration (hukou) system

• Total numbers: around 230 million:– 150 million rural-to-urban migrants– 80 million workers in small rural enterprises

• Excluded from urban welfare

• Low wage levels

Characteristics • Gender structure: 65% male, 35% female.

• Age structure: average age 29; range 16-40.

• Educational level: better educated rural people; two-thirds have junior secondary level

• Mobility: 20% permanent; 60% mobile; 20% seasonal

• Generational change

Employment distribution

• Migrant Employment Structure by Sector (%)

Manufacturing 35

Construction 20

Services 10

Hotel and catering 6

Retail 5

Other 24

Role in total employment

• Migrant Employment in Total Employment (%)

All secondary sector employment

58

Manufacturing 68

Construction 80

Services 52

Income

• Income (2006 survey):• Average monthly income 946 yuan (about $150)• Males 1,068 yuan• Females 777 yuan• Wide regional variations• Half average urban wage• 50% below 800 yuan

• Urban/rural differential (2009)• Urban annual per capita disposable income Rmb 17,175

• Rural annual per capita income Rmb 5,153

• BUT income levels rising: • by 2009 average reached around 1,350 yuan

• Lewisian turning point?

Conflicts of interest

• Employer vs. employees

• Urban residents vs. outsiders

• Local government interests

• Local and central government

4. CONCLUDING OBSERVATIONS

• Over next 10 years labour costs will rise

• Social equity issues more urgent:– Migrant worker protests– Aging population– Unified social security system

• The shift towards higher capital intensity will continue

• BUT China will continue to maintain a significant advantage in manufacturing