Organizer: Margaret Maurer-Fazio, Bates College
Chair: Bruce L. Reynolds, Cornell University
Discussants: William L. Parish, University of Chicago; Bruce L. Reynolds, Cornell University
The industrial reforms of the 1980s profoundly affected the work climate faced by millions of Chinese workers. In the pre-reform period, the urban work environment lacked any of the key features of a labor market. Although work got done and workers got paid, wages were not related to productivity. Employees were assigned to work units by labor bureaus. Workers had no means of exercising employment preferences and employers had no control or choice over the size and composition of their work forces. The reforms introduced the profit incentive into enterprise management and largely dismantled the job assignment system. Reforms have resulted in wages and bonuses being linked to productivity. Enterprise managers now have limited authority to make hiring and firing decisions. Workers also can exercise some degree of choice as to where they work. In sum, an urban labor market has emerged in China. This labor market, nascent as it may be, is influencing behavior in very significant ways.
The papers in this second panel dealing with labor market developments in China are concerned with assessing the effects of the reforms and the spread of market forces on the urban work environment. Loraine West examines China's new pension system with respect to its effects on both workers and further institutional developments. Margaret Maurer-Fazio uses 1992 worker data to assess both individual earnings determination and the effects of spreading marketization on the returns to investments in education. Elizabeth Li uses 1992 survey data to analyze the effects of the reforms on patterns of labor allocation.
Pension Reform in China: Implications for Labor Markets
Loraine A. West, U.S. Bureau of the Census
Pension reform is an important component of state enterprise reform in China but also is necessary for fostering employment growth outside of the state sector. This paper examines China's new pension system and assesses its potential impact on laborers and the development of labor markets. Reform of China's pension system is still ongoing; nevertheless, a picture is emerging of the general structure of reformed and new programs. The paper outlines the main features of the reformed system and identifies both demographic and economic motivations for revamping the former system. The sustainability of the new system is evaluated with respect to an aging population, increased labor mobility, and rapid expansion of employment in nonstate sectors. Specifically, contribution rates are projected under alternative scenarios, including maintaining current benefit levels. In addition, coverage under the reformed system of the total labor force and its subcomponents is projected. The revised pension system appears to inhibit labor mobility less than the former system; however, the new system continues to make a distinction between the urban and rural labor forces which is increasingly inappropriate. With an aging population and contribution rates already high by international standards, maintaining the current level of benefits will place a heavy burden on the labor force in the not too distant future.
Earnings and Education in China's Transition to a Market Economy
Margaret Maurer-Fazio, Bates College
Early analyses of private returns to educational investments in the People's Republic of China reported rates which were astoundingly low. My subsequent analysis, based on a much larger and more representative 1988 data set found similarly low returns for urban workers. However, the results changed dramatically for new labor force entrants-the under 30 age cohort had returns comparable to those in Taiwan, Hong Kong and Japan.
The increase in returns to investments in schooling experienced by urban young people may be attributable to a spread of market forces into the work place with its consequent recognition and rewarding of human capital accumulation. If this is the main impetus for the increase in returns, then we would expect to see higher returns in regions with a more widespread and longer experience of market forces: the private and collective sectors would have higher returns than the state sector; the more-developed coastal regions would have higher returns than the less-developed interior areas; and rates of return would increase over time. Qualified support for these hypotheses is found in the above-mentioned data, suggesting that market forces began to permeate the work place as early as 1988.
I am currently using a rich new data set, gathered in late 1992, by the Chinese Academy of Social Sciences and the Ministry of Labor to carry out a more rigorous testing of these and related hypotheses. I expect to find even stronger evidence of the encroachment of market forces into the work environment.
The Internal Labor Market in Chinese Enterprises: Evidence from Survey Data
Elizabeth Li, Miami University, Ohio
This study analyzes how the patterns of labor allocation within a Chinese enterprise have changed as a result of market reforms implemented in the last decade. As Chinese enterprises become more market responsive in their production decisions, we would expect market forces to exert a greater impact on labor allocation decisions. Similarly, as wage differentials widen within the enterprise and across enterprises, we would expect workers to move from jobs that offer lower compensation to jobs that offer higher compensation. Ceteris paribus, we would expect employees located in regions that have experienced stronger economic growth to report higher mobility across enterprises and within the enterprises.
The study utilizes detailed job history information obtained in a large-scale labor market survey conducted in 1992. The survey includes employees employed in state-owned enterprises, collective-owned enterprises, and joint-ventures. The study limits its focus to the patterns of job changes for workers who stay employed within the same system or the same enterprise. The paper utilizes a logit model to determine the characteristics of workers who reported one or more changes in their job responsibilities or occupations.