Friday, February 13, 2009
Are Unemployed Migrant Workers Similar to Laid Off SOE Workers?
I have been engaged in a discussion with an esteemed colleague on whether the current wave of migrant worker unemployment is similar to the last wave of unemployment, which took place in the late 90s when millions of state-owned enterprise (SOE) workers were laid off. The argument seems straight-forward. Back then, tens of millions (even as high as 50 million) SOE workers were laid off or furloughed with minimal compensation. Aside from thousands of small scale protests in industrial towns, China weathered that wave with few signs of general instability. Why should it be different this time, especially when urban residents now receive minimum living assistance of 2-300 yuan a month and rural residents receive 1-200 yuan a month (assuming the system works perfectly). However, there are some key differences off the top of my head: 1. SOE workers in the late 90s tend to have housing in their factories already, rent free. Migrant workers, should they decide to stay in cities, must pay for housing, which can be quite costly as a share of social security payments.
2. Migrant workers are now on average much younger than laid off SOE workers. A Caijing article has an age break down, and eye-balling it suggests an average age of low to mid 30s, which is quite a bit younger than the average laid off SOE workers of the late 90s (mid 40s to mid 50s). This means migrant workers would not be happy with just a lump sum payment (typical way of settling the SOE workers) and would want increasing opportunities. If frustrated expectation could be measured, I would guess this wave of unemployment, whenever it peaks, will generate much more of it than in the late 90s.
3. Furthermore, SOE unemployment mainly did not affect the welfare of others, especially in insulated factory towns. In contrast, migrant wages are intimately tied to the welfare of 320 million rural laborers (and a much larger body of rural residents). In 2007, wage income made up as much as 40% of rural income. On the margin, growth in wage income contributed to at least half of the rural income growth, if not more. With migrant workers returning home and wages falling for those who are still employed, the income impact on rural households will be enormous. To be sure, the government is trying to counteract it with subsidies, but the impact will be limited.
4. SOE workers lost their jobs, but at least they were not fighting for shrinking resources with those in their own communities. All the workers in a factory town suddenly lost their jobs, but they all still had access to basic goods like housing and some utilities. They all went to petition the government for some money. There were few sources of conflict between the laid off workers. Currently, return migrant workers are fighting for limited land and food with people who chose to stay at the farms. On top of that, there is a severe dought in much of northern China, where many migrant workers come from. The level of local social conflict is probably much higher in this round.
So what if it's worse this time around? As I indicated in a previous post, this just increases the potential for a systemic shock. Of course, it may not happen, but the probability is higher, especially in large cities near where migrant workers live, such as Zhengzhou, Chongqing, and Chengdu.
I have been engaged in a discussion with an esteemed colleague on whether the current wave of migrant worker unemployment is similar to the last wave of unemployment, which took place in the late 90s when millions of state-owned enterprise (SOE) workers were laid off. The argument seems straight-forward. Back then, tens of millions (even as high as 50 million) SOE workers were laid off or furloughed with minimal compensation. Aside from thousands of small scale protests in industrial towns, China weathered that wave with few signs of general instability. Why should it be different this time, especially when urban residents now receive minimum living assistance of 2-300 yuan a month and rural residents receive 1-200 yuan a month (assuming the system works perfectly). However, there are some key differences off the top of my head: 1. SOE workers in the late 90s tend to have housing in their factories already, rent free. Migrant workers, should they decide to stay in cities, must pay for housing, which can be quite costly as a share of social security payments.
2. Migrant workers are now on average much younger than laid off SOE workers. A Caijing article has an age break down, and eye-balling it suggests an average age of low to mid 30s, which is quite a bit younger than the average laid off SOE workers of the late 90s (mid 40s to mid 50s). This means migrant workers would not be happy with just a lump sum payment (typical way of settling the SOE workers) and would want increasing opportunities. If frustrated expectation could be measured, I would guess this wave of unemployment, whenever it peaks, will generate much more of it than in the late 90s.
3. Furthermore, SOE unemployment mainly did not affect the welfare of others, especially in insulated factory towns. In contrast, migrant wages are intimately tied to the welfare of 320 million rural laborers (and a much larger body of rural residents). In 2007, wage income made up as much as 40% of rural income. On the margin, growth in wage income contributed to at least half of the rural income growth, if not more. With migrant workers returning home and wages falling for those who are still employed, the income impact on rural households will be enormous. To be sure, the government is trying to counteract it with subsidies, but the impact will be limited.
4. SOE workers lost their jobs, but at least they were not fighting for shrinking resources with those in their own communities. All the workers in a factory town suddenly lost their jobs, but they all still had access to basic goods like housing and some utilities. They all went to petition the government for some money. There were few sources of conflict between the laid off workers. Currently, return migrant workers are fighting for limited land and food with people who chose to stay at the farms. On top of that, there is a severe dought in much of northern China, where many migrant workers come from. The level of local social conflict is probably much higher in this round.
So what if it's worse this time around? As I indicated in a previous post, this just increases the potential for a systemic shock. Of course, it may not happen, but the probability is higher, especially in large cities near where migrant workers live, such as Zhengzhou, Chongqing, and Chengdu.
Comments:
ｌａｓｔ ｙｅａｒ＇ｓ Ｂｌｕｅ Ｃｏｖｅｒ ｂｙ ＣＡＳＳ ｓｅｅｍｓｔｏ ｉｍｐｌｙ ｔｈｅ ｏｐｐｏｓｉｔｅ． Ｉrecall that one of the surprising findings is that migrant worker respondents rate their urban life acceptable, in stark contrast to the popular wisdom that rural workers who are much more deprived than their urban peers are likely to hate the society most.
Ｉfeel in the eyes of central leadership, urban workers are much more destructive given that they suffer the same level of deprivation than migrant workers due to the traumatic memories decades ago.
Ｉfeel in the eyes of central leadership, urban workers are much more destructive given that they suffer the same level of deprivation than migrant workers due to the traumatic memories decades ago.
# posted by 
: 2:25 AM
: 2:25 AM
Dr. Shih,
My name is Robert (Bobby) O'Brien. I am a fellow G.W./Elliott School Alum currently enjoying a year as a Fulbright Scholar in the P.R.C. My research was originally designed to examine the many ways in which China's 'nongmingong' were stimulating rural social, political, and economic development. In the wake of the global financial crisis, however, I have been focusing more on the impact of the economic downturn on China's migrant workers. In addition, I have been looking at how the central and provincial governments are responding to the massive layoffs that have led so many to return home to the farmlands. I can't offer much insight into how SOE layoffs in the late 90s compare to what is happening on the ground now, but I can provide some information on the current wave of unemployment striking China’s floating population.
You noted the relatively young age of the current generation of laid-off migrant workers (I would be interested to see that Caijing article if you could forward it my way). My (anecdotal not statistical) research confirms this finding. The majority of those losing their jobs are in their late teens to mid-20s, having left home for the coastal cities sometime within the last few years. In your post, you also discussed the potential for frustrated expectations to lead to social unrest. I agree wholeheartedly that this is a distinct possibility. I do not, however, expect such social unrest to develop on a large-scale anytime soon. Most of the migrant workers I have talked to do not yet understand the full impact of the economic crisis on their employment prospects. They view being laid off as simply a temporary setback and expect that they will be able to find work in another city. Not until after they have traveled around a bit and failed to secure a new source of income will we begin to see the manifestations of social unrest that accompany frustrated expectations. I expect that as time passes we will see a significant rise in “mass incidents.”
You mentioned government plans to combat the significant loss in income most rural households are now facing. I have recently commenced work on this topic, focusing my research on programs being developed and implemented in Henan, Anhui, Jiangxi, and possibly Sichuan. A review of relevant literature and a few conversations with scholars familiar with such plans indicate that all the programs are “locally developed and locally funded.” The central government has been touting entrepreneurship as a panacea to the problem of massive migrant worker lay-offs (the China Daily carried an article on it) and some provinces have acted in kind, providing modest loans for the establishment of new businesses. Other plans I have stumbled across range from encouraging tree farming to simply providing the unemployed with a one-time minimal lump sum ($73). If this is something that you are interested in, I can keep you posted as I dig deeper and attain further clarity as to how migrant laborers are being supported by the government after they return home.
As for social conflict resulting from competition over limited resources in the villages, I think this is a distinct possibility. I should note, though, that the farming villages I traveled to in late January featured little of this phenomenon. As you noted, many of those being laid-off are young and were attracted to the cities not necessarily by push factors (economic needs) but rather by pull factors (economic wants, excitement, etc.). Thus, they plan to return home and live off the land and the labor of their elders and aren’t particularly concerned about acquiring a spot in the fields or a pen to raise pigs in. I’m sure, however, that this is not the case everywhere. Furthermore, in areas where the natural resources simply can’t meet the basic needs of the local citizenry (the drought may lead to much of this) social conflict is bound to ensue.
I enjoyed reading this post and think it features some great insight. I hope I was able to provide some useful info. on how the economic crisis is playing out in the migrant worker realm.
Please feel free to contact me at robert.d.obrien.iii@gmail.com.
Best,
Bobby
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My name is Robert (Bobby) O'Brien. I am a fellow G.W./Elliott School Alum currently enjoying a year as a Fulbright Scholar in the P.R.C. My research was originally designed to examine the many ways in which China's 'nongmingong' were stimulating rural social, political, and economic development. In the wake of the global financial crisis, however, I have been focusing more on the impact of the economic downturn on China's migrant workers. In addition, I have been looking at how the central and provincial governments are responding to the massive layoffs that have led so many to return home to the farmlands. I can't offer much insight into how SOE layoffs in the late 90s compare to what is happening on the ground now, but I can provide some information on the current wave of unemployment striking China’s floating population.
You noted the relatively young age of the current generation of laid-off migrant workers (I would be interested to see that Caijing article if you could forward it my way). My (anecdotal not statistical) research confirms this finding. The majority of those losing their jobs are in their late teens to mid-20s, having left home for the coastal cities sometime within the last few years. In your post, you also discussed the potential for frustrated expectations to lead to social unrest. I agree wholeheartedly that this is a distinct possibility. I do not, however, expect such social unrest to develop on a large-scale anytime soon. Most of the migrant workers I have talked to do not yet understand the full impact of the economic crisis on their employment prospects. They view being laid off as simply a temporary setback and expect that they will be able to find work in another city. Not until after they have traveled around a bit and failed to secure a new source of income will we begin to see the manifestations of social unrest that accompany frustrated expectations. I expect that as time passes we will see a significant rise in “mass incidents.”
You mentioned government plans to combat the significant loss in income most rural households are now facing. I have recently commenced work on this topic, focusing my research on programs being developed and implemented in Henan, Anhui, Jiangxi, and possibly Sichuan. A review of relevant literature and a few conversations with scholars familiar with such plans indicate that all the programs are “locally developed and locally funded.” The central government has been touting entrepreneurship as a panacea to the problem of massive migrant worker lay-offs (the China Daily carried an article on it) and some provinces have acted in kind, providing modest loans for the establishment of new businesses. Other plans I have stumbled across range from encouraging tree farming to simply providing the unemployed with a one-time minimal lump sum ($73). If this is something that you are interested in, I can keep you posted as I dig deeper and attain further clarity as to how migrant laborers are being supported by the government after they return home.
As for social conflict resulting from competition over limited resources in the villages, I think this is a distinct possibility. I should note, though, that the farming villages I traveled to in late January featured little of this phenomenon. As you noted, many of those being laid-off are young and were attracted to the cities not necessarily by push factors (economic needs) but rather by pull factors (economic wants, excitement, etc.). Thus, they plan to return home and live off the land and the labor of their elders and aren’t particularly concerned about acquiring a spot in the fields or a pen to raise pigs in. I’m sure, however, that this is not the case everywhere. Furthermore, in areas where the natural resources simply can’t meet the basic needs of the local citizenry (the drought may lead to much of this) social conflict is bound to ensue.
I enjoyed reading this post and think it features some great insight. I hope I was able to provide some useful info. on how the economic crisis is playing out in the migrant worker realm.
Please feel free to contact me at robert.d.obrien.iii@gmail.com.
Best,
Bobby
