lecture 12 emergence of labor markets_revised

8/6/2019 Lecture 12 Emergence of Labor Markets_revised

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0

10

20

30

40

50

60

70

80

90

10011

0

Age

10000 5000 0 5000 10000

Males Females

Age 20-25

in 2002

Age 26-30

in 2002

Population pyramid, 2000 Census

(0.095% sample)


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The Emergence of Labor

Markets: The Conduit of ChinasModernization or the Suppliers

of Its Sweatshops?

Lecture 12


3/45

Purpose of Today

Understand the process of the role of the labor in the rural economyin the modernization of an economy [macro view point]

Look at nature of labor markets how well are they working?

Consider the policies that are needed to move rural developmentforward and eliminate inequality and poverty Rural education Hukou system

Are Chinas labor markets the suppliers of the nations sweatshops?Why would a family send their child to a sweatshop? [micro viewpoint]


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Role of Agriculture in Development

(Johnston and Mellor, AER, 1961) Provide Inexpensive Food

Provide Labor for Industry

Provide Export Earnings

Provide Other Commodities

Provide Income Maintain or Increase Rural Incomes

Poverty Alleviation

Engine of Growth of Productivity


5/45

Strategy

Importance of migration as a driver of growth

Labor markets conduit of development winners use labor markets

Dealing with those left behind (preparing them toleave / taking care of those left behind): Role of trade policy (none after liberalization)

Role of agriculture vis--vis off farm employment (whydo we need a strong agriculture?)

Challenges of development: trade liberalization


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Labor Market in Rural China

Research showed that rural income growth in1990s was almost totallydependent on off-farmwork [Rozelle, 1996];

Major factor in poverty alleviation also found tobe labor markets in 1990s [Park et al., 2006]; Create link between poor areas and the rest of the

economy;

Rising rural incomes throughoutChina dependon employment off the farm plus newinvestments in housing and new businesses[Giles and deBrauw, 2006]


7/45

More than just higher incomes...

Labor markets can also help create

necessary conditions for development:

Population moves from rural to urban areas

(as it has in everydeveloped country)

Shift from agriculture to industry


8/45

Transformation Path

Percent

of Popn

in Ag.

Sector

Income per Capita

US and other OECD

nations

Ethiopia, Rwanda, etc.


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Transformation Path

Percent

of Popn

in Ag.

Sector

Income per Capita

China: with only about 30

percent of population in urban

areas if it is successful in

developing, it will necessarily

move along this rural-urban

transformation path


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Data

Collected in a nearly nationally representative

sample of households in late 2000

6 provinces - 1 in each of Chinas major zones

Hebei, Shaanxi, Liaoning, Zhejiang, Sichuan, Hubei

5 counties per province-- one randomly selected from

each income quintile

2 townships per county, 1 village randomly selected

within each

20 households randomly selected in each


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Employment History

In half the households, asked a 20 year

employment history of all adults and

children of the household head

Whether employed off-farm or not

If so

Location and whether lived at home

Self-employed or not Level of involvement in farming


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Overall Increase in Off-farm Work

0%

20%

40%

60%

80%

100%

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Year

off-farm busy season part time farm only

In 2000: 45% of rural labor force have

jobs off the farm more than 80% of

households have at least 1 personworking off the farm

In 1980:only 4%

worked full

time off

the farm

>50%

2006


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Percent of Workforce Off-farm, by Age

Range

Age Range 1990 2000

16-20 23.7 75.8

21-25 33.6 67.2

26-30 28.8 52.5

31-35 26.9 47.6

36-40 20.5 43.3

41-50 20.8 37.6

2006

85-90%

85-90%

> 70%


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Comparison of Off-farm work, by age

range

Workers Aged 16-2

0%

20%

40%

60%

80%

100%

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Year

Workers Aged 41-5

0%

20%

40%

60%

80%

100%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Year


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Migration-fastest growing segment

0%

4%

8%

12%

16%

20%

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Year

PercentofTotalWorkforce

MigrantWage

Earners

Self employed

TVE/Local

wage earning local

migrant

Self employed also growing fast sign of healthy

growth or break down of formal wage sector?

2006 > 20%


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Why is rural growth/

transformation important?

0

2

4

68

10

12

Total Inputs TFP

TFP

Annual growth rate

Alwyn Young, QJE

TFP


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Because in rapidly growing Asian

economies, a healthy rural economy is a

driver of growth!

0

1

2

3

4

Total IndustrialTFP

Ag TFP Shift Effect

TFP

Annual growth rate

This is the effect of taking a poor, underutilized young

son/daughter of a farmer and moving him/her into a factory


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Productivity Rise in Picture

From tending a plot of land smaller than

most of our gardens


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to jobs in the heart of Chinas industrialization zone


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Self employment-second fastest

growing segment

0%

4%

8%

12%

16%

20%

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Year

PercentofT

otalWorkforce Migrant

Wage

Earners

Self employed

TVE/Local

wage earning local

migrant



2006 > 20%

2006> 15%


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0.2

0.3

0.4

0.5

0.6

0.7

0.8

Proportionofselfem

Trade/Transportation/

Enterprise

Custom labor provider/servic

While in some countries the rise of a self-employed sector is

seen as symptomatic of the failure of the formal wage sector, in

China there is evidence, the self employed sector is healthy,

growing and increasingly sophisticated

Relatively capital

intensive growth

rate of profits andcapital stock exceed

that of TVEs


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From petty traders and marginalized street

vendors


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... to manufacturers and


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to high-end tradesman!

Wh i h i l i


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What is happening to employment in

those old TVEs?

0%

4%

8%

12%

16%

20%

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Year

PercentofT

otalWorkforce Migrant

Wage

Earners

Self employed

TVE/Local

wage earning local

migrant



2006 > 20%

2006> 15%


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Summary: how good are labor

markets

More movement (larger numbers)

More migration

Specialized (longer term)

Younger

More educated

Returns to Education?


27/45

Educational Attainment and Return to Schooling

4

5

6

7

8

9

10

11

12

13

14

4 5 6 7 8 9 10 11 12

Africa Latin America

Asia

MidEast

Rural China

OECD

Years of education

Rateofretu

rn(%


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Other results on rising return to labor in

rural China overtime

Year Returns (%)

1988 0 (insignificant) 1992 4 (significant-10%)

1996 9 (highly significant)

2000 11 (rural migrants)

Zhang, Huang and Rozelle, 2001, JCE

Panel data of 113 hhds in Jiangsu (collected by authors)


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Educational Attainment and Return to Schooling

4

5

6

7

8

9

10

11

12

13

14

4 5 6 7 8 9 10 11 12

Africa Latin America

Asia

MidEast

Rural China

OECD

Years of education

Rateofretu

rn(%

Rural China--2000


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Summary: Descriptive Findings

Rapid Off-farm Employment Growth-- even in

the late 90s

Change is consistent with: a transition from agriculture to non-ag.

Percentage of workforce fully employed in agriculture

decreasing

Trends really clear among young workers

Shift from ruralto urban workforce started

Migration has become dominant form of off-farm work


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Policies

Three major policies:

Human capital

Human capital

Human capital

Why? In most developing countries, the most abundant

resource of rural residents is labor need to improve

its value.

Poor rural education largest constraint

Also: breakdown hukou system

[probably second largest distortion]


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Educational Achievements

Nearly achievement of the two basics

1. universal compulsory education2. eradicating illiteracy

99% primary enrollment rate

99% retention rate for primary school

92% retention rate for middle school

Narrowing of the gender gap in education

Increase in teacher quality, e.g. more

teachers are certified

Diversification and increase in financial

resources for education Expansion of higher education

Emphasis on innovation and quality


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But, in rural areas schools can still be really poor


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Policies

Three major policies:

Human capital

Human capital

Human capital

Why? In most developing countries, the most abundant

resource of rural residents is labor need to improve

its value.

Poor rural education largest constraint

Also: breakdown hukou system

[probably second largest distortion]


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What are consequence of hukou

system? Too many to cover:

Although much less strict than during Socialist era (andearly reform period), still maintains privileges of urbanresidents

Two systems of health care / insurance

Two systems of social security Migrants come by themselves to city leave families

behind Family strains

Children education suffers

Dormitory life still little low cost housing

Plus: has effect on labor markets Feminization of agriculture?

Aging of farming?

My condo bought


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My condo bought

with 20% down; a

4.8 percent 20 year

variable mortgage

Isnt that a beautiful place

to live?

Unfortunately, migrants

could never afford to buy

Still policies biased against

permanent migration


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Feminization ofagriculture?


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Labor Feminization?

Household Share: Little Evidence of Ag Fem

0.48

0.49

0.50

0.51

0.52

0.53

0.54

0.55

0.56

0.57

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Es timate1 Es timat e2 Es timate3

Estimated Proportion of Farmwork by women within household

Source: CCAP survey

In fact, NO

EVIDENCE!

Aging of the


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Aging of the

countryside

these are thepeople that producChinas food


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Agricultural Feminization among

the Middle-Aged CohortsAge cohort Women Men

% workingon farm

Mean hoursin 2000

% workingon farm

Mean hoursin 2000

16-25 32.8 544 39.5 551

26-35 81.2 849 76.5 793

36-45 91.2 944 86.7 861

46-55 86.0 911 90.3 892

Over 55 40.4 575 69.2 833

All 65 827 70 803


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But, aging is also apparent

Age cohort Women Men

% workingon farm

Mean hoursin 2000

% workingon farm

Mean hoursin 2000

16-25 32.8 544 39.5 551

26-35 81.2 849 76.5 793

36-45 91.2 944 86.7 861

46-55 86.0 911 90.3 892

Over 55 40.4 575 69.2 833

All 65 827 70 803

Even if cant call it feminization it is fair to say: womenhold up half the sky


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Conclusions-1

Trends in rural labor force in China areconsistent with a healthy development path(add to rural incomes)

Labor markets have contributed to growth Further policy change can help or hinder

movement Urban policies (remove hukou: building towns,

loosening restrictions on movement)

Rural policies (strengthening rural educationand health HC / HC / HC)


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Conclusions-2

Rosy picture?

Maybe from macro / micro point of view

BUT: remember:

These guys have brutal lives

Work is hard dangerous dirty So, if it is hard dangerous and dirty: Why

would parents send their kids to thesesweat shops; coal mines; Karokes?

Preferences Environment and Behavior in Rural China


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Risk and Infor

Preferences, Environmentand Behavior in Rural China

Environment:

Risk and costly

poor information

Preferences

lecture 12 emergence of labor markets_revised

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