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Bridge urban-rural gap to steady labor market

By Lu Ming (China Daily)
Updated: 2008-06-12 07:48

Among the wide variety of topics discussed after the May 12 earthquake, one is particularly interesting: whether the quake would worsen the labor shortage in our country.

This issue has been in public focus since 2004, and the academia is divided on it.

One group of scholars thinks the labor shortage in China is at hand because the coastal areas, the traditional destination of migrant workers after they leave their rural home to seek industrial jobs, are facing a low supply of labor and the average salary is continuously rising in recent years.

Another group takes the view that the labor supply will no longer be as unlimited as it was. And a third one, with which I agree, holds that a labor shortage is still far away at this moment.

Our opinion is based upon several solid facts, the primary one of which is that China's urbanization rate is relatively low compared with the scale of its industrialization. And this rate is also lower than that in other countries under similar development levels.

Meanwhile, many researches suggest the income gap between urban and rural populations keeps widening despite all the State efforts to stimulate the development of agriculture and raise the income of rural residents.

This gap is also a proof that the labor shortage is yet to come because it would be narrowed quickly when migrant workers have a considerable rise in their salary, which is a significant part of the rural residents' income, if the demand for labor outnumbers its supply.

Another income gap also becomes obvious between urban groups with and without local identity papers under the household registration system. Local identity brings better pay when the surveyed have roughly the same qualifications, including education degrees.

Combining all these facts, it is not convincing to say that China is having a labor shortage.

Admittedly, it is true that the coastal areas could not find enough hands for their industries, but there is an array of complex factors for this temporary and regional scarcity.

The demographic structure of our labor force is one of the most important ones. Since the country suffered three years of natural disasters between 1958 and 1961, in which many lives were lost, it had an obvious decrease in the population aged around 20 in the 1982 national census. It is easy to see that children born from this group would decrease.

And during the same census, the population under four years old is also small for the State formally initiated the family planning policy in 1980.

By 2005, the supply of migrant workers sharply decreased, especially those about 24 years old. On the one hand, the population about this age is relatively small for the above two reasons. On the other hand, they have also reached the age of marriage, after which most tend to stay with families instead of seeking jobs in cities.

This demographic element is a direct reason for the diminished number of migrant workers.

Another element is the changed balance of demand and supply on the labor market.

The central government has taken numerous measures to boost the development of rural areas, like repealing the agricultural taxes, increasing public investment in rural education and offering a variety of subsidies and other favorable policies to farmers. The living standards of farmers have been raised significantly since the late 1990s. Therefore, the rural residents feel a lesser urgency to find jobs in cities.

The other side of the coin is that China witnessed strong growth in the export of labor-intensive industries since it became a member of the World Trade Organization in 2001. And the export growth was further accelerated after 2004, which added more pressure to the labor market.

Of course, the changed balance in the demand and supply of labor only bears a short-term influence. A more profound reason for the temporary and regional labor shortage, as well as for the low urbanization level of the country is an institutional illness - the segmentation between rural and urban areas on the labor market.

Such segmentation could be observed in the inferior payment and welfare of the migrant workers in cities than the urban residents. They are not covered under the same social security program with urban employees and their children could not gain an equal access to education with the urban kids.

If such discrimination is not eliminated, the migrant workers would, sooner or later, go back to their rural homes. And the labor supply in cities is unlikely to be abundant.

Instead of a labor shortage, we should worry about the long-term segmentation between cities and countryside, the obstacles against labor flow posed by this segmentation and the segmentation between urban groups with and without local identities.

The segmentation threatens urbanization growth, which is a source for China's sustainable development.

Worse, the income gap, stemming from the segmentation, plays a significant role in threatening the investment growth as well as economic growth as a whole. And it also threatens social stability.

It is more important to consolidate the labor market by lifting the barriers between cities and the countryside and narrowing the income gap by encouraging a free flow of laborers than being concerned about the labor shortage, which may take quite some time to come.

The author is a professor with Fudan University

(China Daily 06/12/2008 page8)