Labor Market Vulnerability in Urban China

    I. Introduction
    The Chinese labor market has been facing with a significant transition. As evidenced by frequent labor shortage and rising wages for migrant workers, it is believed that China has already passed through the Lewis Turning Point (Cai, 2007). This labor market change affects the quality of jobs through several channels.
    During the era of unlimited labor supply, the ceaseless labor flow out of agriculture weakened the bargaining power of labor. Since the employers take a dominant position, employees were incapable of imposing stress on the enterprises in the aspects of the salary level, working time, labor intensity and working environment, etc. so that they are always obliged to accept conditions unbeneficial to themselves. Under such circumstance, even if the laborers require to raise wages and to improve the labor protection conditions, the enterprises would not commit to do so. It is hard to reduce the vulnerability of jobs in such situations even the government has wishes to do so.
    After passing through the LTP, the scarcity of labor presses the firms to compete for laborers. As a result, the employers have to raise the wage offer and other conditions so as to attract labor, otherwise workers will vote with feet and choose other opportunities.
    The observation from the Chinese labor market indicates that, when facing with labor shortage, the enterprises provide quality jobs actually have no trouble in recruiting enough migration workers. Thus, under the conditions of being short of labor supply, enterprises must improve laborers’ treatments so as to reduce the reservation wages for those who were out of labor market previously. The new changes of the supply and demand of labor force in China make more and more entrepreneurs follow “enterprises shouldering social responsibilities” with great interest.
    In addition to the pressure of voting with feet from migrant workers, the Chinese government has been promoting the tripartite talk mechanism for employment and wage decisions, which increases the opportunities for workers to express their demand for wage rates, working conditions, and other work related requirements. In particular, the Employment Contract Law enacted in 2008 is widely considered as a milestone marking the Chinese labor market moving towards employment protection.
    As an important stakeholder in the labor market, local governments taking the responsibility for keeping economic development in local areas are also responsible for social stability too. When facing with the situations of labor shortage, attracting the migration workers is of importance to guarantee the labor input and then sustain local economic growth. Under such situation, local governments tend to make friendly policies for migrants. For example, in recent years some practices on social security system have been applied in coastal areas in order to cover migration workers. In addition, local government plays active role on labor market by monitoring the enterprises to reduce vulnerability of jobs so as to mitigate the negative impacts of labor shortage on local economic development.
    Despite of these positive changes, China still has a long way to go if providing quality jobs is set up as one of the goals in labor market development. In particular, significant disparities in quality of jobs are found between migrant workers and urban workers holding local hukou. In this case, the labor market policies aiming to reduce the overall level of job vulnerability also need to bridge the gaps between groups of workers.
    The paper is organized as follows. The next section introduces the main labor market developments in recent years in China, including rural to urban migration, trend of informality, social protection system, and recent development in labor market institutions. Section three tries to measure the vulnerability in urban labor market by introducing a new measurement in social security and job security. Section four describes the vulnerability of jobs using the new tools we developed and observe the vulnerability variations across various groups of workers. A regression-based decomposition is applied to analyze the sources contributing to job vulnerability. The final section concludes.
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