How Economic Restructuring Affected Chinas Urban Workers

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How Economic Restructuring Affected Chinas Urban
Workers?

• Li Yuanqin(Anlina)
• 2007967415

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Outline

• Background
• Trends in employment status
• Response to economic shocks
• Public Assistant
• Private Support
• Reemployment
• Conclusion

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Background

• Economic Restructuring in China has been
  characterized by gradualism and pragmatism
• Iron rice bowl
• Under Chinas socialist system, government
  maintained a strong commitment to provide
  lifetime employment, housing, health care and
  pensions to a majority of urban workers through
  state-owned enterprises.

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• Reform of the state-owned enterprises (SOEs)

• Causes
• By the mid-1990s, soft budget constraints and the
  governments full employment goals had led to
  substantial redundant labor in SOEs (Dong and
  Putterman, 2001 and 2003 Li and Xu, 2001).
• Accumulated financial losses of SOEs
• threatened the solvency of the state
  controlled financial system.

• Strategies
• Seizing the large and letting go of the small
  (Cao, Qian, and Weingast, 1999)
• Ownership Reform (Lardy, 1998)

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• Implicit

• Lifetime employment was replaced by massive
  layoffs, widespread unemployment, forced early
  retirements, and frequent failure to provide
  promised wage, pension, and health care benefits.

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Trends in employment status
Five Sample cities

• By examining key work status outcomes of
  different demographic groups (aged16 to 60) from
  January 1996 to November 2001, looking at trends
  in
• the unemployment rate (UR)
• the labor force participation rate (LFPR)
• the employment rate (ER).
• The identity ER (1-UR) LFPR.

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• Trends in UR,LFPR,ER

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• Changes in work status by educational attainment
  and ownership sector

• Employment shocks were strongly correlated with
  educational attainment compared with city and
  ownership sector in changes work status.
• By ownership sector, there was a sharp jump in UR
  and a sharp fall in LFPR in the state-owned,
  state-controlled and collective sectors. In
  private, the UR fell and LFPR increased.

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• The determinants of labor outcomes

• Determinants of Unemployment and Labor
  Force Participation by Gender

January 1996 and November 2001
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Are Job Separations Voluntary?
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Changes in wages and benefits
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Responses to economic shocks

• Public Assistant
• Xiagang program
• Unemployment insurance program
• The minimum living standard program (MLSP)
• Private Support
• Reemployment

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Public Assistant

• Xiagang programm

• A special temporary policy to support newly
  laid off workers was formally implemented
  nationwide from1998 to January1,2001.
• Intended for permanent workers employed before
• labor contracting began in 1986 or contract
  workers whose jobs were ended before contracts
  expired.

Zhang (2003)Most workers in xiagang
program received mandated benefits,retraining
centers had a high success rate with job
referrals. However, some survey found much
poorer performance One fourth of the workers
received no xiagang subsidies Most xiagang
workers did not receive other benefits as
promised Most received no help from
reemployment centers in learning new skills or
finding new jobs.
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Unemployment insurance program
The government standardized it in 1999,which
financed by payroll charges and provides
subsidies for up to two years depending on how
long the worker and/or the work unit has
participated.

• Workers whose three years of xiagang subsidies
  expired become immediately eligible for
  unemployment benefits.

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The minimum living standard program (MLSP)
The minimum living standard program (MLSP)
was administered in a relatively ad hoc fashion,
lacking standardized poverty lines, funding
support, administrative or supervision.
Central government financing began in 1999 and
expanded significantly in 2001.

• Some problems, such as lower minimal amount,
  narrower scope of security. Those aged 40-50
  faced layoffs, leave and buyouts were shortage of
  channels to employment.

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Public Assistant
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• The coverage of public support increased
  monotonically
• with the age group of the worker
• The xiagang subsidy program reached many more
• people than the nascent unemployment
  insurance
• program or the MLSP.

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• However, there is some overlap in the targeting
  of xiagang and unemployment subsidies
• There remained substantial shares of
  dislocated workers who received no public
  support at all
• Most received no help from reemployment
  centers in learning new skills or finding new
  jobs, which was much poorer performance.

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Private Support

• Means of Support

• Private support more important for those
  voluntarily leaving jobs.
• For retirees, very few reported primary reliance
  on private support
• Comparing income and consumption of households
  with working and non-working members, households
  with a man not working was much lower than that
  of households with a woman not working, specially
  middle-aged (aged 30 to 50).

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Reemployment

• In 2705 job separations,34.8 were employed again
  within one year and 44.7 were reemployed by
  November 2001.
• Those losing jobs because of restructuring had
  38.0 found new jobs within one year compared
  with other involuntary reasons.
• The share of men reemployed within one year was
  higher than share of women
• Individuals with more education were more likely
  to be reemployed.

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Conclusion

• Urban workers in China weathered substantial and
  widespread adversity during the period from1996
  to 2001.
• Although Public assistance programs for
  dislocated workers achieved mixed success, there
  were numerous problems to solve.
• Suggestions
• Designing appropriate policy system
• The enhancement of ongoing monitoring and
  analysis of the nature of economic
  difficulties
• Improving the functioning of public and private
  support mechanisms and creating jobs.

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• References
• 1 How has Economic Restructuring Affected
  Chinas Urban Workers, China Quarterly, Giles,
  John, Albert Park and Fang Cai (2006).no. 185
  (March), 6195.
• 2China's Economic Restructuring, Structural
  Adjustment and Social Stability Shang quan,Gao
  China Economic Review, Spring 1997, v. 8, iss.1,
  pp. 83-88
• 3Economic Restructuring and Income
  Inequality in Urban China, Meng,Xin Review of
  Income and Wealth ,Series 50, Number 3, September
  2004
• 4 Trade Liberalization, Economic
  Restructuring and Urban Poverty The Case of
  China Liang, Zhicheng Asian Economic Journal,
  September 2007, v. 21, iss. 3, pp. 239-59

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The end
Thank you very much