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Labor Markets


The marketization of labor may be judged from five aspects: the freedom of labor in choosing jobs, the freedom of bargaining for wage rates, the freedom of flow of labor, the freedom for employing labor and the differences in regional economic levels as reflected by the wage rates of labor. Establishing a unified urban and rural labor market is not only the innate requirement for establishing a market economy system, but also an objective necessity for accelerating the industrialization and urbanization of China and for ensuring sustained, healthy and rapid development of the economy. The marketization of China’s labor is estimated to reach 45% by the end of the Ninth 5-Year Plan, reach 65% by the end of the Tenth 5-Year Plan, and from mid-transition to late-transition.

Large numbers of surplus rural labors flowing to urban areas and flowing from backward areas to developed areas will help restrain the rise in wage costs in the urban primary labor markets, so as to keep China's manufactured goods competitive in the field of international trade. It brings out the concentrative effect of the cities to keep steady increase in total consumption volume and sustained upgrading of consumption standards, forming new growth points for the economy. The current situation of development shows that after over 20 years of reform and opening up. China's market economy system has been preliminarily consolidated; the conditions for the integration of urban and rural labor markets are basically available; enormous progress has been made in reforms relating to social security, housing and household registration system, preparing for the integration of the labor market; rules, regulations and measures have been enforced for improving the labor employment ability and for protecting the lawful rights and interests of employees.

On the whole, the in-depth advancing of China's reform is constantly reinforcing the basic conditions for free flow of labor in China. A unified national labor market full of vigor is about to be completed, providing China's economic development with more sustainable vitality and inexhaustible power.

Currently, there are 700m employees in China, of which rural laborers(500m) takes up 70% and urban laborers(200m) takes up 30%.

Among the rural labors, 35% is in the non-agricultural business (less than 10% in 1978), while 65% is in farming, forestry, animal husbandry, agricultural side-line industries, and fishing (90% in 1978). The majority of the employees of township enterprises, private enterprises, and individual laborers in non-agricultural businesses have to a greater extent become marketized laborers (60% marketization).

Only a small number of farming laborers become marketized laborers during a short period (for instance seasonal work outside or work as wheat harvesters), while the majority still lack the awareness and the internal and external conditions for entering a market, and in general still belong to a self-sufficient economy. (Marketization degree is estimated to be between 25% to 30%. For instance, 73% of the area cultivated grows grain, and 70% of the grain is for farmers’ own consumption; half of the agricultural income is income in goods.)

Therefore, China’s rural laborers’ marketization currently reaches 40%. In other words, it increased an average of 2% during the 20 years of reform and opening up. Based on this, by the end of the Ninth 5-Year Plan it may reach 45%, and 55% by the end of the Tenth 5-Year Plan.

Among the urban labors, state-owned units’ employees dropped from the 80% of 1978 to 55% currently. Because reform of state-owned enterprises has not been thorough, employees of state-owned enterprises on the whole are not a marketized labor force, their marketization degree is lower than 30% (this can be seen from the very low mobility rate).

The marketization level of laborers in non-state-owned enterprises is estimated to be 70%. Therefore, marketization of China’s urban labor is 50%. In other words, this is a 2.5% increase during the 20 years of reform and opening up. Based on this, it should reach 55% by end of the Ninth 5-Year Plan and 65% by end of the Tenth 5-Year Plan.

However, since China is still practicing an urban/rural segregation residency-management system, and a cadre status system still exists in China (in which the party manages mid-level cadres, personnel departments manage common cadres, and the labor bureau manages workers), laborers with higher degrees and position are less marketized.

One can say that tens of millions of employees with cadre’s status are basically not marketized. Though they are small in number, their influence is great. Therefore, the condition for marketizing China’s laborers is still not there. (Of course there is some illegal marketization of the labor force in China as well, such as cadres moonlighting on the side, but this is not our issue here. Regional policies are all obviously discriminating against laborers from outside and the so-called urban capacity fee is one example. The ratio between the urban capacity fee, or black market price for a residency permit, and the average urban salary can reflect from one angle the marketization of labor. And this ratio currently can range from 1 to 10.)

Therefore the above-mentioned judgment should be somewhat lower. Taking into consideration both urban and rural laborers, China’s marketization has risen from almost zero in 1978 to 40%, and is estimated to reach 45% by the end of the Ninth 5-Year Plan and 65% by end of the Tenth 5-Year Plan (the estimate for the next two years is based on the past, and the estimate for the Tenth 5-Year Plan is based on accelerated reform).


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