Informal Employment and Internal Migration: The Case of China

Johannes Jütting Theodora Xenogiani OECD Development Centre

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DRC, Beijing, 27 November 2007

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Why Focus on China?

• Big informal sector: about half of urban employment is informal • Large migrant flows from the countryside to cities: 120 – 150m internal migrants • Serious concerns about migrants’ social protection rights, working conditions and integration • Less focus on the situation of those (family members and others) who are left behind in rural areas

Characteristics

• Informal employment accounts for about ½ of total urban employment (different definitions provide slightly different results) • Employment in the informal sector rose from 32m in 1995 to 125m or 47% of total urban employment in 2004 (Cai, Du and Wang, 2006) The informal sector is considered as: o the fastest growing segment of urban labour market o a highly dynamic and mobile sector o heterogeneous o more competitive and less segmented than formal sector o often as the driver of economic growth in China

Employment Trends

Structure of Employment in Urban (Rural) Areas

1990 1996 2002 Self employment Regular wage employment (formal sector) (informal sector) Irregular employment Source: Ghose 2005 3.7 (73.7) 86.8 (12.9) 86.5 (12.6) 0.3 (0.3) 9.5 (13.4) 8.9 (75.3) 78.9 (17.1) 75.8 (16.0) 3.1 (1.1) 12.2 (7.6) 9.6 (76.9) 51.4 (22.2) 43.2 (19.3) 8.2 (2.9) 39.0 (0.9)

Characteristics

What is particular about the informal sector in China and the way it is perceived?

• Considered as one of the main forces driving economic growth • Treated as part of national economy, subject to government regulations and management • A highly mobile, dynamic and competitive sector • It has tight links with internal migration

Causes of Growing Informality

• Economic restructuring (decline in agriculture, SOE restructuring) • Migration to cities, urbanisation, demographic pressure • Productivity, missing formal jobs • Labour market segmentation • Globalisation leading to increasing demand for labour intensive product exports • Weak formal safety nets • Social protection system providing incentives for growing informality • Other?

Migration: High and on the Rise

1997 1998 1999 2000 2001 2002 2003 2004 Source: Cai and Wang, 2005 Numbers and growth rates of rural migrants Numbers (million) Increases (%) 38.9

49.36

52.04

61.34

26.89

5.43

17.89

78.49

83.99

98.31

102.60

27.96

7.01

17.05

4.5

Migration: Only Positive?

• Migration has played a major role in Chinese growth and economic development (macro level) • Migration “must” be good for the migrants themselves (micro level) BUT concerns about: o Social protection of migrants and their families o Workers’ rights and work conditions o Social impact in sending regions o Sustainability?

Migration, Labour Markets and Social Protection: An Emerging Agenda in China?

Key questions: • What policies need to be put in place to manage the challenges of social protection and bad work conditions?

• What is the impact of migration on families left behind (remittances, social protection, education, health care)?

• What is the impact on the sending regions (labour markets, productivity, trade)?

• What changes in institutional set-ups are needed to promote a more harmonious society?

Thank you!

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