1. Introduction
It is well known that China has been a dual economy for a long time. Under such economic system, labour markets are segmented between rural and urban areas. However, with fast economic development and large flow of labour mobility, more and more rural migration workers work in urban labour market. In 2006, according to statistics from NBS, there were more than 130 million rural migration workers who work and live in urban areas at least 6 months. This challenges the traditional system of labour regulation that only took emphasis on urban labour forces.
Among means of labour market regulations, minimum wage is widely used in other economies while it has been introduced into China for a short history. In 1990s, China kicked off the practise of minimum wages. However, the minimum wage policy was not strictly implemented at that time, which to large extent related to the labour market situations. In the 1990s, the restructuring of urban economy and cyclical effects led to a serious dislocation in urban labour market. With shrinking SOEs, more and more urban workers enter private sectors that consist of a large share of informal work. Although entering informal sector partly reflected the labour market development, the level of protection for informal work is limited. When observing from aggregated data, it is easy to find that the labour force participation rates had been declining in the 1990s combing with increasing unemployment rates (Cai et al. 2005). As far as the enforcement is concerned, it was difficult work for the regulators to implement minimum wages when labour market situation was so tough.
In addition, the rural surplus labour forces who moved out of agriculture and rural areas and worked in urban labour market also consisted pressure for minimum wage implementation. Rural migration workers dominantly worked in the informal sectors that are difficult to gauge their payment by the minimum wage standards.
Labour market situation has changed in recent years, which is evidenced by the coming Lewsian turning point. As the joint result of China’s economic growth and demographic change, the country approaches a turning point, at which labour shortage and wage rise occur. As part of the process, the speed of labour market integration increases as well. Through integration into the global division of labour, China’s labour-intensive manufacturing sector has boomed and world-wide employment opportunities have been seized. As a result, more than 100 million rural labourers have migrated to urban jobs, and laid-off and unemployed workers have been re-employed in an economy with high growth rates. With economic development, the pattern of production factors endowment in China is being restructured, implying the coming of a historical turning point.
When reaching the turning point, the employees have more bargaining power than before, which let it possible for migration workers to vote with feet. As response to the turning point, the employers have to care about labour protection otherwise they will lose the competition for workers. That is why we see wage rising and improvement for working conditions in recent years. To sustain regional economic growth, the local governments tend to compete for attracting migration workers by devoting to construction of a friendly environment for migrants, including strict implementation of the minimum wage policy.
In this report, we are going to review the minimum wage policies in China by looking though different sources of data. In chapter 2, a policy review is presented. The next chapter exploits city level data to look at minimum wage adjustment and policy changes. Chapter 4 takes advantage of household data collected in urban labour market and analyze the implementation of minimum wage at micro level with particular focus on migration workers. The final chapter concludes some findings……
