MIGRANT WORKERS AND ECONOMIC GROWTH IN CHINA Slides courtesy of: Prof. Andrew Watson University of Adelaide Lecture 10: Economic Development

Structure of Lecture 1.Background on development model before 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 (Source: World Bank, China: Promoting Growth with Equity, 2003)

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

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

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 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 (%) Manufacturing35 Construction20 Services10 Hotel and catering6 Retail5 Other24

Role in total employment Migrant Employment in Total Employment (%) All secondary sector employment 58 Manufacturing68 Construction80 Services52

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