Whats Happening to China's Migrant Workers? A New Generation Coming and Going

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In 2008, about 130 million people worked as rural-to-urban migrants in China's cities, making up around a third of the total urban labour force. As they are heavily active in exporting sectors that were impacted by the downturn in the last two years, around 15% of the migrant workers (or 20 million people) are said to have lost their jobs in 2008 based on a survey carried out in 15 provinces by the Ministry of Agriculture in January 2009.

But that was then. Now in 2010, various media reports in February highlighted a shortfall of a many as a million migrant workers in Guangzhou and Dongguan. People's Daily has published statistics collected by Guangdong's human resources and social security departments stating that by February 22 this year, more than 3 million migrants had returned from other provinces to Guangdong, much less than the almost 7 million migrant workers who had originally left for the Spring Festival holiday. Guangdong's enterprises, the report stated, currently lack the services of about 900,000 workers, of which most are needed in labour-intensive industries, although technical workers are said to make up 32% of the shortfall. In Dongguan, more than 20% of migrant workers are not expected to return to work now that the Spring Festival is over, according to one survey

So what happened to China's migrant workers? Much of the reason for the current shortages is being put down to the explanation that the pressures forcing migrant workers to industrial zones in the big cities are just not so intense, at least not now. Due to gradually increasing incomes in rural areas and the growth of second- and third-tier cities, many workers no longer have to make the trek to Shanghai for menial labour, or they can go somewhere else closer to home.

Consider for example the following chart, illustrating the changing income levels in rural and urban areas in China in recent years:

Incomes.jpgIncome levels of both urban and rural households have been steadily increasingSlide 2, and while urban households initially experienced higher growth rates compared to rural households, this disparity has been decreasing in recent years, and the convergence is especially evident since 2004 (see above). So if things are looking up in the countryside, why bother at all going to the big city?

The current shortage of migrant labourers is not the first time this has happened in China; in fact, the economic upswing of the same year (2004) also caused labour shortages in the cities (see source 2 below). The cities are not taking it lying down, however, and apart from simply raising wages, much is being done to continue attracting migrant workers. Shanghai will this year become the first Chinese city to provide free education to all school children of migrant workers, and a government advisor in February announced that young migrant workers will be granted more social service benefits and will be assisted to buy or rent homes in smaller cities closer to their home villages, not in expensive places like Beijing or Shanghai. The government is apparently also considering amending its election law to increase the number of rural representatives that can be elected to the legislature from the current one deputy for every 960,000 rural residents. 

Yet while many migrants are enjoying the luxury of choosing to stay away, many more of them are inexorably drawn into the cities with all these locations have to offer. Over the past decade, over 200 million people have entered the cities through official or unofficial migration, and the share of agriculture in employment has declined from 326 million in 1998 to 270 million in 2008. As a rapidly developing economy, China's urbanisation rate has increased from 18% in 1978 to 44.9% in 2008. Yet throughout the country, less than one quarter of the rural population has migrated
(see source 2 below), suggesting vast potential for further migration as China's urbanisation rate increases.

And today's migrant workers are different from older generations who only laboured on building sites. Now, a new generation - born after 1978 - plays an important role in city life, and People's Daily has described them as white collars who now pay much more attention to their own labour rights and are opinionated on equality and fighting discrimination.

No surprise then that many migrant workers choose not to return to the cheap factories in Guangdong and Dongguan. 

Further reading on China's migrant workers:

1. How much do we know about the impact of the economic downturn on the employment of migrants? (Meng, Kong, Zhang), ADBI Working Paper Series, February 2010.

2. China's labour market in transition. Job creation, migration and regulation (Herd, Koen, Reutersward), OECD Economics Department Working Paper No. 749, February 2010.

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And the effect that this is having on house prices? Is there a bubble now?

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