China's Labor Movement

Chinese economic progress was requiring a radically new system of labor force and its implementation to provide a sustainable internal development and international affairs improvement. Over the past few decades of economic reform, China’s labor markets have been transformed to an increasingly market-driven system.

Labor market and labor shortage

China is currently at the point when the amount of the working population is decreasing. While there is low birth rate due to the one-child policy in China, the aging population is getting larger because of the improving living conditions, so naturally the number of people who are able to work is getting smaller.

There are also certain changes in the migrate workers behavior. Young migrate workers nowadays increasingly have an expectation of a long-term urbanization. 85% of people who are moving to the big cities to find a job are claiming that they are not moving to the countryside, while 99% are saying that they are not going back to farm. Alongside with the changes in work perception, segmentation between workers creates a shortage in one area and a surplus in another. However, the period of China’s labor scarcity is certainly approaching in the near future.

Another target of the recent research is set on migrate workers identity, their collective consciousness of themselves as a group. The observation of present generation of migrate workers discovered that there is a number of characteristics that set them apart from the previous one. First of all, their level of education is much higher. The government is going to optimize educational resources as a mechanism to ensure that rural and less developed receive greater support, and also to expand the coverage and improve the standards of education subsidies, but it still remains a significant problem. Secondly, they are proved to have much smaller families, who have been investing much in their education to satisfy the increasing educational requirements of the most factories. Therefore, their knowledge of the law and labor protection is higher than before.

There have been a number of new regulations in the labor legislation, like labor contract law, social insurance law to provide a better protection to the workers. However, the implementation of such laws leaves a lot to be desired. The trade Union in China has also been given more power. Given the circumstances and expanding governmental support, migrate workers expectations and wages are growing up, along with the labor disputes and strikes. High employment and rising wages should promote stronger domestic consumption. It’s also an indicator of strength in China’s factories and offices – taking on more workers to meet rising demand. But rapid increases in the cost of labor are also a reminder that the structural transition in China’s labor markets – from excess supply of workers to excess demand – is real and starting to bite.

There are several phenomena, which can characterize the current labor force movements. For instance, legal consciousness is getting higher, people now think of themselves more as of the participants of the legal system. The gap between the legal awareness of local and migrate workers is narrowing. Generally speaking, workers become more knowledgeable about the law and also become more interested in their legal expectations. In fact, people’s expectations are rising faster than the level of institutionalization.

One of the main reasons for China’s rise over the past three decades has been the competitive advantage it has received in having an exceedingly sufficient supply of low-cost labor. However, Chinese manufacturing, which was earlier characterized by extensive amount of cheap and competitive labor force, is now facing more and more challenges. As experts say, China’s labor will grow in price for the next 10 years, mostly because it has been underestimated over the last decades. China’s political development and reforms were relying on the cheap labor force for many years. With rapid economic growth, average income rates are no longer able to attract the sufficient amount of workers to urban construction and service. Demographic advantages, which once were serving China’s development interests, are now gradually becoming extinct. The aging speed of China’s population is now a problem that cannot be underrated by China’s government.

It is generally assumed that China's demographic dividend has remained in its initial advantage, a stage that depends on the quantity rather than the quality of its workforce. With a threat of losing the labor quantity advantage, China has to offer a new competitive factor, which will determine whether international companies would still place their assets at the China’s market. One of the distinctive features of China’s labor nowadays is the quality and qualification of Chinese workers, comparing to those in other Asian countries like Thailand, Laos or Myanmar, which can offer the cheapest labor resources. Labor quality and special skills can become a stable advantage on the way of future long-term development. Meanwhile, without the institutional changes, the unskilled labor “shortage” in cities may worsen and migrant workers’ wages in cities will rise further. With a quality oriented demographic dividend, the benefits of economic development can achieve sustainability by strengthening human capital formation. This may induce capital outflow to other low-cost countries and Chinese industries will increasingly move to the capital and technology-intensive end of the spectrum. Thus, understanding unemployment and wage growth became crucial for a successful market development. China has established and continually improved the employment service system, which includes the recommendation of employment, job training, unemployment insurance and service companies work and employment. The government encourages the development of institutions of public employment recommendation and encourages the extension of the employment service to communities, to thereby form a service network employing multiple levels.

Labor migration

Serious structural changes of Chinese development system lead to the growth of the biggest current migration flows in the world. The substantial amount of migrants not only has a significant influence on the China’s politics and economics, but also became one of the main concerns of Chinese government. There is a row of factors explaining an increasing number of Chinese people moving to more developed areas. High unemployment rates in the countryside and huge income gap became driving force of the national migration flow. More and more people are willing to be engaged in a non-agricultural sector and improve their life quality. Because institutional restrictions discourage migrants from staying in cities because institutional restrictions discourage migrants from staying in cities when unemployed, it is no surprise that migrant employment rates are extremely hen unemployed, it is no surprise that migrant employment rates are extremely high.

As a matter of fact, the major labor migration flows in China are aimed at the Eastern developed regions, it is said that 150 million more migrants will crash the big cites in order to find prospects for personal development. Most of those are there to ease the hard job burden of the coastal areas, they are mainly providing future development projects construction. The majority of migrate workers take the job, which is usually considered to be dirty, difficult or even dangerous, and thus less attractive for the local people who initially have opportunities of getting better education. These migrate workers play significant role in the improvement of developed cities and solving a lot of problems connected with labor shortage. However, this demographic dividend is coming to an end and the low-skilled labor market is beginning to sink.

At the same time, while the big cities grow bigger, the migration flows also are causing the number of obstacles for equal district development in China. Talented and intelligent young people are leaving their villages and townships without development perspectives and moving towards not necessarily the brightest future. As many experts mention, they are no longer focused on a seasonal job with a latter return to the countryside. They start to compare their life with the locals, leaving the country life behind. If before, migrants were happy to get more they could get in their villages, now they want to be regarded equal with local workers, including wages level, labor rights and social insurance. Although it is the better-educated rural workers who tend to migrate, they still have considerably he better-educated rural workers who tend to migrate, they still have considerably less schooling (9.2 years) comparing to their urban hukou counterparts (12.3 years).

Many experts are wondering whether it is possible that most of the current rural areas will be urbanized, so that rural workers do not have to move to cities to become “urbanized”. It has always been the Chinese government’s policy intention to develop small and medium-sized cities, precisely for the purpose of reducing large-scale rural–urban migration. The policy slogan is “leaving agricultural work, but not leaving rural areas”. However, the possibility of bringing these cities to the intense economic life of China is another challenge for Chinese authorities.

Labor market discrimination

Because a large population, abundant labor resources, economic restructuring and other factors, China faces an enormous employment pressure. The Chinese Government has always considered the promotion of employment as a strategic task for economic and social development. Recent policies are aimed at encouraging of rural labor to find employment in their own localities. Another regulation is improving the labor allocation. Authorities drive rural workforce to move to other areas in search of employment. As the success of rural reform has greatly increased the efficiency of agricultural production, the surplus rural labor force has begun to flow to urban areas and the interior of the country west to the eastern coastal areas. It makes full use of the advantage of local resources field, actively readjusted the structure of agriculture and rural economy Migrants have always been at the lower end of the wage distribution, earning on average only 45 percent of the average urban hukou workers’ hourly wage. Several conjectures might explain the differential earnings growth between urban and migrant workers. First, labor supply conditions for the two types of workers are very different. Currently more than 70 percent of the population of China has rural hukou, and of the rural and of the rural hukou work force only 22 percent are working in urban areas. However, restrictions placed on rural–urban migrants terms of job access prevent them from becoming perfect substitutes for urban workers. The potential supply of migrant workers is significantly larger than for urban hukou workers, which should suppress wage growth for migrant workers. Secondly, modern Chinese economy demands highly educated, skilled workers and hence favor predominantly urban hukou workers.

These elements are all related to the long-standing policy of a rural–urban divide: urban workers are protected from competition from rural labor supply; they are directly protected so they may obtain good jobs; and indirectly, they receive better-quality education. The policies discouraging migrants from staying in cities for a long period not only lower migrant earnings but also disadvantage the economy by not allowing migrants to reach their potential productivity peak.

China has experienced exceptional labor market changes in recent decades, which will affect national development in the future. China has a shrinking urban population so new entrants to the labor market will come primarily from the rural areas. Rural population remains significantly less educated. Considerable institutional restrictions are still an obstacle for rural migrants urban job access are on their way of getting decent social welfare and social services in cities. As a result, Chinese cities have begun to experience some unskilled labor shortages even though more than 50 percent of the labor force is still in the rural sector. China needs a real change to eliminate migration restrictions and improve the rural–urban education to complete in the near future in order to avoid escalation of the labor force tension. In addition to paying more attention to higher education in the next five years the country will seek "new standards" to ensure more equitable education system. The labor-related reforms are part of inevitable process in the socio-economic and structural transformation of China. Strategically, China should begin to improve the quality of human capital, to develop the services sector, strengthen the areas that provide sustainable jobs and improve the overall quality of the workforce. More specifically, there is a need to reform the education system, the employment system, the hukou registration system and the pension in order to reduce institutional barriers for human resources, to be able to face the challenges of an aging society and declining labor force.