Employment in China After It Reached Lewis Turning Point CAI Fang Institute of Population and Labor Economics Chinese Academy of Social Sciences.

Employment in China After It ReaEmployment in China After It Rea

ched Lewis Turning Pointched Lewis Turning Point

CAI FangCAI FangInstitute of Population and Labor EconomicsInstitute of Population and Labor Economics

Chinese Academy of Social SciencesChinese Academy of Social Sciences

Neoclassical Contracts to LewisianNeoclassical Contracts to Lewisian

Neoclassical scenario Lewissian scenario

Wage determination

Based on marginal productivity

of labor

Subsistence wage based on average

agricultural product

Market clearing Market clearing via LM where

supply & demand interact to

determine wages

Institutional barriers preventing labor

oversupply from clearing up

Employment

problems

Cyclical, structural and

frictional unemployment

Underemployment in agriculture and

unlimited supply in urban sectors

Gov’t responsibility

& efforts

Tackle cyclical and natural

unemployment

Promote employment and eliminate

institutional obstacles

This Presentation Intends toThis Presentation Intends to

• How demographic transition reshaped LM and employment in China

• Employment problems mixed by factors of both neoclassical and dual economy characteristics

• 3 groups with special vulnerability exposed to cyclical & natural unemp’t with focus on migrant workers

Demographic Transition and Demographic Transition and

Labor Market OutcomesLabor Market Outcomes

China Demographic TransitionChina Demographic Transition

Demography-resulted Labor ShortageDemography-resulted Labor Shortage

- 20

- 15

- 10

- 5

0

5

10

15

20

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Incr

ease

of

WAP

(mil

.)

Urban Rural

Labor Force Is AgingLabor Force Is Aging

0

100

200

300

400

500

600

700

800

900

1000

2005 2010 2015 2020

Work

ing

popu

lati

on (

mill

.)

20-34 35-49 50-64

Labor Demand Continues IncreasingLabor Demand Continues Increasing

0

50

100

150

200

250

300

350

400

450

500

Urba

n em

ploy

ment

(mi

l.)

2002

2003

2004

2005

2006

2007

2008

2009

2010

Urban mi grant workers Urban resi dent workers

Scenarios of Labor DemandScenarios of Labor Demand

3. 74. 2

4. 75. 2

6. 16. 8

7. 68. 3

0

1

2

3

4

5

6

7

8

9

8% 9% 10% 11%Annual growth scenar i os

Empl

oyme

nt g

rowt

h ra

tes

(%) Secondary Terti ary

Wages Increases in All SectorsWages Increases in All Sectors

0

5

10

15

20

25

30

35

4019

98

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Year

Ag

ricu

ltura

l wa

ge

s(y

ua

n/d

ay)

0

200

400

600

800

1000

1200

1400

1600

1800

No

n-a

gri

cultu

ral w

ag

es

(yu

an

/mo

nth

)

Grai n Pi g f arm CotonManuf . Const ruct i on Mi grants

Challenges Are Brand NewChallenges Are Brand New

for Chinese Governmentsfor Chinese Governments

From Dual to Neoclassical ScenarioFrom Dual to Neoclassical Scenario

Workers’ Expectation Increasing, tooWorkers’ Expectation Increasing, too

0

200

400

600

800

1000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Num

ber o

f Lab

or D

ispu

tes

Cas

es(t

hous

and)

Cases Accepted Cases Mediated

Gov’t Identified 3 Vulnerable GroupsGov’t Identified 3 Vulnerable Groups

Incomplete UrbanizationIncomplete Urbanization

10

20

30

40

5019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Popu

lati

on s

hare

(%) Non- agr share Urban share

Agricultural Labor Is AgingAgricultural Labor Is Aging

40 over50%

31- 4031%

26- 309%

21- 251%16- 20

9%

Migrants’ Insecure EmploymentMigrants’ Insecure Employment

240

245

250

255

260

265

270

275

280

285

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Day

s

0

20

40

60

80

100

120

140

160

180

Mill

ion

Days-m Days- f Numbers

Low Coverage of Social SecurityLow Coverage of Social Security

40. 9

52. 747. 9

34. 9

57. 0

3. 7

13. 1

24. 1

2. 0

9. 8

0

10

20

30

40

50

60

Cove

rage

rat

es (

%)

Urban workers Mi grant workers

Policy Agenda for New EraPolicy Agenda for New Era

• Integrating labor market (hukou reform)

• Labor market institutions (collective barg

aining)

• Broader social protection mechanism

• Employment-centered macroeconomic po

licy

Thank you for attentionThank you for attention