China’s Labour Market Transition: Labour Mobility and Wages

After the 1978 policy of reform and opening up, Chinese economy is transiting from a planned economy to a market one. Meanwhile, its labour force also became more mobile, leading to job turnover and internal migration. In addition, the wage setting became more market-oriented rather than centrally administered. Motivated by these changes in the post-reform Chinese labour market, this thesis empirically investigates job turnover, wage compensation and return migration in China, all of which consider the impact of the household registration system.
Chapter two empirically studies job turnover in China. The 1978 policy of reform and opening up brought changes to the Chinese labour market. For example, the number of life-long employment was reducing and meanwhile the scale of the non-public sector was expanding. Therefore, people have more employment choices than before. Using employment histories recorded in the 2008 China General Social Survey, discrete-time survival analysis is used to examine the motivations for job turnover. Respondents registered in urban and rural areas are considered separately in the analysis. However, the results show no significant difference in job turnover between urban and rural registered people.
As bonuses, housing subsidies and social insurances are currently common employment benefits in China, chapter three asks whether there is a wage reduction when higher benefits are provided to employees, which can be explained by the compensating wage differentials hypothesis. Using data from the 2009 Rural-Urban Migration in China, both urban employees and migrant workers are included in the sample. A wage equation and three benefit equations are estimated simultaneously. Instrumental variables are selected to correct for the endogeneity problem of benefit variables in the wage equation. The results show that there is no trade-off between wages and benefits, meaning that benefits do not have a compensating effect to wages.
The fourth chapter uses Cox survival analysis to study the return migration in China. Previous studies have found that return migration in China is due to the household registration system and the macroeconomic environment both domestically and internationally. However, this chapter argues that return migration is more likely to be associated with employment and household factors. Employing data from the 2009 Rural-Urban Migration in China, chapter four considers the heterogeneity in return migration between the new and old generation migrants, where the former are taken to be born after 1980. The results show that the new generation migrants experience more return migration than their old counterparts. This implies that integrating to cities may be difficult even if the new generation migrants have a stronger desire to stay in cities permanently.
The thesis concludes that although the Chinese labour market is becoming more mobile and wage setting is more flexible, people with different registration status are experiencing different outcomes and respond differently to these changes. Therefore, the policy implication of this thesis is that the Chinese society as well as its labour market should transit from a dual track system to an integrated one.