Has China run out of surplus labour?

Many recent studies claim that China has reached a Lewisian ‘turning point’ in economic development, signalled by rising wages in urban areas and the exhaustion of rural surplus labour. In this paper we show that despite some evidence of rising nominal urban unskilled wages between 2000 and 2009, there is little in the data to suggest that this wage increase has been caused by unskilled labour shortages. China still has abundant under-employed workers with very low income in the rural sector. We argue that China's unique institutional and policy-induced barriers to migration have both prevented many rural workers from migrating to cities and also reduced the migrants' length of stay. We project that under alternative institutional settings, the migrant stock could easily be doubled from the current 150 million to 300 million by increasing either the average length of migrant stay, or the migrant inflow, or both.     

Agricultural labour and the incidence of surplus labour: experience from China during reform

This paper contributes to the pool of studies of rural underemployment and revisits a number of estimates of surplus agricultural labour in China. The study is devoted to the conceptualization, identification and measurement of surplus at regional, provincial and national levels by a stochastic frontier functional specification. The analysis indicates that the existing size of agricultural surplus labour is still significantly large with the continued practice of the household registration system and China's WTO membership.     

Rural-to-urban migration in China

"One consequence of economic reform in China has been the greatly accelerated migration of labour from rural areas to cities. Estimates suggest an annual migrant labour flow of around 50-60 million people, of whom 10-15 million have settled permanently in cities. This article surveys the information that has become available from a number of population and labour surveys. It covers the volume, spatial and temporal dimension of rural-to-urban migration, the characteristics of migrant labourers, the determinants of migration and the impact of migration on China's rural and urban economy."     

Leave behind or migrate? Evidence from a field experiment in China concerning the impact of being left behind/migrating status on children's behaviour and preferences

With the great economic and social development achieved in China in the past 40 years of reform and opening up has come the extensive flow of China's very large rural labour force between urban and rural areas and among regions, as well as populations of left-behind children and migrant children who cannot be ignored. In this paper, four populations—non-left-behind children in rural areas, left-behind children in rural areas, migrant children in urban areas, and local children in urban areas—were recruited in a large-scale field experiment that included the dictator game, ultimatum game, trust game, public goods game, coin-tossing task, intertemporal choice task, a calculation contest task, and a gambling task. Both being left behind and migrating had a negative effect on the children's prosocial behaviour (including fairness, trust, trustworthiness, cooperation, and honesty) and economic decision-making (including time and competition preferences). Moreover, the effect on migrant children was relatively greater, but this effect dissipated progressively as time since migration increased. Additionally, shorter migration distances were associated with a decreased effect of migration on migrant children, and having access to one parent had a positive effect on left-behind children.     

Migration constraints and development: Hukou and capital accumulation in China

Rural–urban migration flows are a crucial corollary of economic development. The adverse or beneficial effects of internal migration, for sending as well as receiving areas, and the definition of optimal migration policies, have remained much discussed issues since the seminal works of Harris and Todaro (1970). This debate is especially acute in China where the “household registration system” (hukou) acts as a strong constraint on individual migration. This paper aims to assess the consequences of hukou through a simple model of a developing dual economy with overlapping generations. Contrary to existing studies focused on the contemporaneous allocation of economic resources, it deals with the dynamic consequences of migration flows and migration policies. It shows that, in fairly general circumstances, hukou-related migration constraints can actually hasten development, understood as the transfer of the labor force to the modern sector, driven by capital accumulation. The hukou system could thus be one of the causes of the extremely high Chinese saving rate and of the high pace of Chinese development. Insights from the model are confronted with stylized facts from the Chinese development, and theoretical results are especially consistent with the effects of the 2001 “towns and small cities” reform.     

Contrasting paradigms: segmentation and competitiveness in the formation of the chinese labour market

An urban labour market is in the process of being formed in China. The objective of this paper is to analyse the stage that it has reached. A 1999 household survey is used to investigate whether the labour market has three tiers comprised of recently retrenched and re-employed urban workers, non-retrenched urban workers, and rural–urban migrants. It tests whether wage levels and structures differ across these categories of worker. Panel data are used to model the evolution of the wage structure and, specifically, the impact of retrenchment and re-employment. The results indicate that non-retrenched urban workers enjoy a wage premium, although migrants receive similar returns to education. Re-employed workers receive no return to education and appear to have lost out on the wage rises enjoyed by the non-retrenched. There is evidence to suggest that the urban labour market is segmented into these categories, which differ in their openness to market competition. The urban labour market has a long way to go before it is fully competitive.     

China's Surplus Agricultural Labour Force: It's Size,Transfer, Prospects for Absorption and Effects of the Double-Track Economic System*

The commune economy had two basic characteristics: one was its three-grade pyramid-type structure of organisation which integrated government administration and economic management; and the other was its “self-sufficient” and “closed-door” character. Under this system farmers had no free choice about their occupation and place of residence. With the collapse of the commune system, institutional reorganisation of China's rural economy occurred. Farmers had more choice now about their production, their occupation and place of residence based on the development of a modern commodity and market economy. In this process of institutional reorganisation, transfer of surplus agricultural labour is a key factor. The concept of the agricultural labour surplus is discussed and discussions in English of this concept and associated theory and policy are reviewed. With reform of rural economy and improvement of agricultural labour productivity, the quantity of surplus labour in rural China has increased. Greater labour absorption is required in both agricultural and non-agricultural sectors, but particularly in non-agricultural sectors. In China, several impediments to transfer of surplus agricultural labour still exist. The transfer of surplus agricultural labour in contemporary China occurs in the context of a nationwide “double-track” economic system (a market-oriented economic system harnessed to a centrally planned and controlled economic system) and a “dual economy” in which modern industries exist alongside a traditional indigenous agricultural economy. Income gains provide the main motivation for farmers to transfer to non-agricultural activities. It is the income difference between farming and non-farming activity, not whether the marginal labour productivity in farming is zero that is important. By building and developing free or open markets one provides a suitable climate for labour transfer and migration. In the absence of free or open markets, farmers have little free choice. The continuing system of household registration is a serious institutional barrier to transfer or migration by farmers. Furthermore, the system of equal farmland contracts also hinders the process of transfer or migration. This might be overcome by allowing the transfer of rights to use farmland and facilitating “part-time” transfer of agricultural labour. Withdrawal of “surplus labour” from farming can cause grain output to drop. This can occur because if “better” farmers leave agriculture, the quality of farm labourers as a whole declines and because of a rigid price system which discriminates against agricultural products. While current transfers of surplus agricultural labour in China may well have increased income inequality between rural residents and between regions, if there had been greater freedom of migration this might have resulted in less income inequality. To the extent that market reform in China has resulted in greater freedom of economic choice, it appears to have increased the level of production obtained from China's limited resources. This is not to say that the market system will result in a perfect solution even though the economic results can be expected to be much superior to the commune system adopted in the past by China.     

The direct impact of the relocation of farm labour on Chinese grain production

The shift from collective to household-based farming and the move towards a market economy have increased the opportunity cost of grain production and caused a withdrawal of labour from grain farming in China. Since Chinese grain production is important to both China and the world, there are concerns about whether such a farm labour relocation will have a destructive impact on China's grain production. The previous production function studies ignored the effects of changes in labour quantity and quality on grain production. Using recently available sample survey data on Chinese farm households, this paper incorporates production function analysis with human capital analysis to examine the direct impact of the relocation of farm labour on China's grain production. It has found that the relocation of farm labour has not harmed the Chinese grain production in general, but its impact varies across regions with different factor endowments that affect the choice of farming technology.     

Health Status and Earnings of Migrant Workers from Rural China

The migration of rural laborers into cities for employment has been one of the main driving forces of China's economic growth over the past three decades. Based on a dataset collected by the Ministry of Agriculture of China from 2003 to 2007, this paper examines the impact of health on the earnings of migrant workers engaging in physically‐intensive work requiring good health. Our findings indicate that a poor health status not only weakens the incentive of rural laborers to participate in the migrant labor force but also significantly reduces their earnings. A migrant worker in poor health only earns 67 percent of what a healthy worker makes. Among all the human capital characteristics and family economic factors, health status is the most influential on earnings for less educated workers. Labor productivity has a greater impact on earnings than the annual number of days that a person works. Ongoing health‐care reforms aimed at the improvement of the health‐care services available to rural laborers are urged to help reduce poverty in rural China.     

Peasant labour for urban industry: Temporary contract labour,urban-rural balance and class relations in a Chinese county

Urban-rural relations in China have a dual character: while a higher level of urban-rural economic balance than most other countries has been achieved, a sharp structural cleavage between workers and peasants has been maintained, based mainly on strict household registrations. Peasants are prevented from migrating to towns and gaining employment there, except under specially approved contracts arranged to resolve local shortages of industrial labour. Contract labour has complex and important effects on rural and urban industrial development. It also embodies the duality of urban-rural relations in China: at the same time as it redistributes wage funds from urban to rural areas, it reinforces the class cleavage between workers and peasants (including contract workers). It also opens up a complex web of inequalities and cleavages among those peasants with contract work and those without. Contract workers have been placed in a contradictory class position which has been a flashpoint of political conflict. The relationships of contract labour to urban industrial and rural development, urbanization, urban-rural balance and structural cleavage, class structure and political conflict are examined through a study of Shulu County, an ordinary rural area with agrowing industrial centre in which over half of the industrial labour force is comprised of peasant contract workers.     

Surplus agricultural labour and China's Lewis turning point

Official data are criticized for over-reported agricultural labour statistics. We derive an alternative series of labour participated in agriculture with the information of production cost and revenue. Using parametric stochastic frontier approach, labour requirement functions are estimated for 30 farm and animal husbandry products in rural China. The estimated required amount of labour is compared with our newly-derived observed agricultural labour to obtain the surplus labour. This surplus ranges from 18% to 12% of agricultural labour between 2001 and 2013. Our results reveal that China was relatively successful in reducing redundant labour in rice production. Equally important, the trends of our estimated surplus place China in the second stage of transition under the Lewis-Fei-Ranis framework, moving in the direction of full commercialization or the so-called Lewis turning point.     

Impact of Childcare and Eldercare on Off‐farm Activities in Rural China

Using individual data collected in rural China and adopting Heckman's two‐step function, we examined the impact of childcare and eldercare on laborers' off‐farm activities. Our study finds that having school‐aged children has a negative impact on rural laborers' migration decisions and a positive impact on their decision to work in the local off‐farm employment market. As grandparents can help to take care of young children, the impact of preschoolers is insignificant. Having elderly family to care for decreases the income earned by female members of the family. Although both men and women are actively engaged in off‐farm employment today in rural China, this study shows that women are still the primary care providers for both children and the elderly. Therefore, reforming public school enrollment and high school/college entrance examination systems so that migrant children can stay with their parents, this will help rural laborers to migrate to cities. The present study also calls for more public services for preschoolers and the elderly in rural China.     

The rise of migration and the fall of self employment in rural China's labor market

When examining questions regarding the Lewis model, one of the most salient set of facts involves the shift of labor between agricultural and the off farm sectors. The goal of this paper is to answer several questions about the nature of this movement: How has the expansion of the economy after 2000 affected off farm labor market participation? Has off farm labor continued to rise? What is this rise being driven by—migrant wage earners or self employment opportunities? What is, in part, driving these trends? Using a national representative set of data that consists of two waves of surveys done in 2000 and 2008 in six provinces, the paper finds that off farm labor market participation has continued to rise steadily in the early 2000s. However, there has been a structural break in the trends of occupational choice before and after 2000. Unlike before 2000, after 2000 migration's growth accelerated; during this same period the self employed subsector stagnated. The number of wage earning migrants in 2008 was greater than the number of those in the self employed subsector. The data also show that the rise in wage-earning migration is mainly being driven by the younger cohorts. Our analysis also shows that the rise of migration is happening in conjunction with a rising unskilled wage.     

Seasonal Migration and Microcredit During Agricultural Lean Seasons: Evidence from Northwest Bangladesh

This paper investigates the interlinkage between microcredit and temporary seasonal migration, an issue which has been given little attention in the standard rural–urban migration literature. Seasonal migration due to agricultural downturns is a common phenomenon in developing countries. Using primary data from a cross‐sectional household survey of the northwest part of Bangladesh, this paper quantifies the factors that influence such migration decisions. Our results suggest that people with prior access to microcredit are more likely to migrate during an agricultural lean season. Furthermore, we find evidence of a negative selection effect between microcredit and seasonal migration, conditional on an individual's village of residence and observed characteristics. Our results have numerous potential policy implications, including the design of typical microcredit schemes for developing countries.     

International labour migration in the Asian-Pacific region: patterns,policies and economic implications

"This paper reviews the literature on international labour migration from and within the Asian-Pacific region. It deals with patterns and characteristics of migration flows, government policies towards labour migration, and economic implications of labour migration for both labour-exporting and importing countries in the region. The indications are that, despite gradual slowing down of labour flows to the western industrial countries and the Middle East, labour migration will continue to be a major economic influence on surplus-labour countries in the region. As an integral part of the growth dynamism in the region, labour migration has now begun to take on a regional dimension, with immense implications for the process of industrial restructuring in high growth economies and the changing pattern of economic interdependence among countries."     

China has reached the Lewis turning point

In the past several years, labor shortage in China has become an emerging issue. However, there is heated debate on whether China has passed the Lewis turning point and entered a new era of labor shortage from a period of unlimited labor supply. Most empirical studies on this topic focus on the estimation of total labor supply and demand. Yet the poor quality of labor statistics leaves the debate open. In this paper, China's position along the Lewis continuum is examined though primary surveys of wage rates, a more reliable statistic than employment data. Our results show a clear rising trend of real wages rate since 2003. The acceleration of real wages even in slack seasons indicates that the era of surplus labor is over. This finding has important policy implications for China's future development model.     

Rural labour markets: the welsh example

This paper examines the rural labour market within Wales over the last decade. Data from the Labour Force Survey and the New Earnings Survey are used to compare trends in economic activity rates, employment, education and earnings in rural Wales with the rest of the country. In addition to the rural-urban comparison, evidence presented from other rural labour market studies is used to establish similarities between the rural labour market within Wales and the rest of the UK. In this respect, the paper collects evidence from which the need for differential labour market policy between the rural and urban area can be assessed.     

Does family planning help the employment of women? The case of India

This paper gives some insight into the existence of a positive effect of family planning programmes on women's employment in developing countries. We study married women aged 15–49 living throughout India using a sample drawn from the National Health Family Survey (NFHS-2) for 1998–1999. We focus on a programme of doorstep services delivered by health or family planning (FP) workers who are sent to visit women in their assigned areas. Results derived from the estimation of fixed effect linear probability and conditional logit models show a positive and significant correlation of the share of women living in a local area (village, town or city) that has been visited by FP workers with the probability of women's employment. A multinomial analysis also shows that the largest positive effect of FP in rural India is to be found on paid work, as opposed to unpaid work, suggesting a potential empowering feedback of demographic measures through labour earnings.     

Hitting the Great Wall: Structural change and China's growth slowdown

China is facing slowing growth rates, slowing rates of rural to urban migration and resistance to reforms that would liberalize internal migration restrictions (Hukou). We use a two sector Ramsey growth model and show that, allowing for endogenous capital accumulation, labour reallocation has accounted for approximately one fifth of China's per capita GDP growth over the last 30 years, and that Hukou reform could generate a significant boost to China's per capita GDP growth over the next decade. Our results contrast with conclusions drawn from the traditional growth accounting literature on labour reallocation effects in China because our simulation method allows for endogenous capital accumulation dynamics.     

Land fragmentation and farm productivity in China in the 1990s

The main objective of this study is to examine the effects of fragmentation on farm productivity in China and to discuss policy implications. Some earlier work has questioned the importance of the economic costs of land fragmentation in developing economies. It has been argued that policymakers should focus instead on reducing the root causes of fragmentation: inefficiencies in land, labour, credit, and food markets. Our results, using a more recent and larger dataset from a household survey in China, find that fragmentation does have an economic cost in China. Production functions are estimated for each of the major grain crops in the sample provinces. We also argue that to reduce the economic costs, land consolidation in China should be undertaken with less government intervention. More attention should be given to the establishment of markets for land (or land use rights) and improvements in rural credit and grain markets.