In antidumping by the European and American countries,
tremendous attention was paid to the marketization of production
factors, particularly whether the labor flow and wages rates were
market-determined. In the United States' criteria for judging a
market economy country, free bargaining of wage rates between the
employer and the employee was listed as the second of the six
statutory requirements, next to the convertibility of currency,
indicating the importance of market determined labor flow and wage
rates for a market economy. Marketization of labor as an important
production factor directly affects the costs and prices of
products. Such high attention is perfectly understandable,
therefore. An analysis of China's market determined labor flow and
wage rates will benefit the exchange of important information
between China and other countries, accelerating the marketization
of production factors.
I. Selecting and Analyzing the Indicators of
Marketization of Labor
The marketization of labor may be judged from five aspects: the
freedom of labor in choosing jobs, the freedom of bargaining for
wage rates, the freedom of flow of labor, the freedom for employing
labor and the differences in regional economic levels as reflected
by the wage rates of labor.
(Ⅰ)The Degree or Freedom of Labor in Choosing
Jobs
The degree of freedom of labor in choosing jobs means the
freedom in which the labor chooses jobs between industries with
different work conditions and wage rates on the basis of his or her
own capability. It is the role played by the market mechanism in
promoting the inter-trade flow of labor. The following is an
analysis on the degree of the freedom for labor to choose jobs in
respect of urban and rural areas:
1 .Freedom in Choosing Jobs for Urban Labor
Urban labor consists of employees in urban economic units and
college and high-school graduates, the details are given as
follows:
(1)Urban Economic Units
Before reform, labor was not allowed to choose jobs freely, nor
could the employing unit dismiss labor. With the promoting of labor
contract system, the labor and the employing unit would sign labor
contract according to their own wills. Therefore, the rate of
signing labor contracts reflects the freedom for choosing jobs in
urban economic units. The urban enterprise and institution units
include units in state-owned sector, collective sector and in other
sectors. Included in the "other sectors" are units in ventures with
foreign funds or cooperation, and in private and individual
sectors. In order to reflect the changes taken place in
marketization, sample data from the years of 1992, 2000 and 2001
are used for analysis.
After 1995, the labor contract system for employees was
implemented. All economic units signed labor contracts so that the
rate of signing labor contracts reached nearly 100 percent. It may
be safe to say that after 1995 urban economic units basically
realized freedom for the labor to choose jobs.
(2) Urban College Graduates
At the beginning of the reform, college graduates were assigned
with jobs according to the government's plan, so the graduates had
very limited freedom in choosing jobs. With the reforms in the
educational system going on, the method of assigning jobs according
to government plan was modified, jobs were available through a
variety of ways combining government assignments, college
recommendations, human resources fairs and negotiations between the
employer and the applicants.
In 1992, about 50 percent of the graduates were assigned with
jobs according to the Ministry of Education' plan, the rest of them
chose their jobs at their own will according to the market
situations.
In 2000 and 2001, the assignment of jobs to graduates was
basically conducted in both directions, and jobs assigned according
to the Ministry of Education's plan accounted for less than 5
percent of the total. Special cases did exist, in which the
students were educated under sponsorship, with predetermined job
positions or assigned by military colleges. But such cases
accounted for a very small fraction.
2. Freedom in Choosing Jobs for Rural Labor
Before reform, China had a typical dual economic structure. With
the reform and opening up going on, the rural productivity rose up,
triggering off the shift of a large number of surplus labor towards
the non-agricultural fields. Some of them entered the urban labor
market; others went to rural township enterprises and rural
individual and private enterprises. The formerly separated urban
and rural labor markets were to some extent unified, and the
mechanism for the flow of urban and rural labor became more
effective. Omitting what was discussed in the foregoing passages,
we'll focus on the part of labor that did not shift to the urban
areas. To facilitate our analysis, this part of labor is
categorized as labor engaged in agriculture and those in
non-agricultural activities. The proportion of non-farm employment
in the total rural labor can both show the changes in China's dual
economic structure and the greater freedom for the rural labor to
choose jobs.
(Ⅱ)Freedom of Bargaining for Wage Rates
Wage rates are the prices of labor, and the wage rates
determining mechanism is the key mechanism functioning in the labor
market. Under the conditions of market economy, wage rates play the
role of allocating labor resources, and are an important factor in
influencing the labor flow. Concerning the freedom of bargaining
for wage rates, the discussion is carried out in respect of freely
determined wage rates for urban labor, proportion of
non-agricultural income in peasants' net incomes, the workers'
negotiation ability and trade union's role in the following
order:
1.The Degree of Marketization of Wage Rates for Urban
Labor
Under the traditional planned economy system, the central
government formulated a uniform national standard for Wages by
administrative measures, and pay-rises were also subject to the
government's unified planning. This wage distribution system had
absolutely nothing to do with one's efforts and had extremely
hazardous effects on the workers' initiatives, thus resulting in
low productivity. Since the reform and opening up, a series of
adjustments were made in the wage distribution system, so that
wages and wages were gradually linked with the performance and
revenues of the enterprise, reflecting the supply and demand of
labor.
(1) State-owned Enterprises, Institutions and Government
Institutions
①State-owned enterprises: since the 1990s, with the deepening of
the market-oriented reforms of enterprises, the relationship
between the government and the enterprises was gradually clarified.
The government being the capital contributor of the state-owned
enterprises no longer interfered with the operation activities of
the state-owned enterprises. With respect to the wage rates, the
interference was gradually replaced by industrial guidance wage
rates.
②Government institutions: the Provisional Regulations on
Civil Servants issued in 1993 formulated a graded wage system
mainly based on one's position and rank. The rate of wages will be
determined by the civil servant's position, rank, years on the
current position and years of total work experience. The wage of
the civil servant consists of base rate, position wage, longevity
pay and bonuses.
③Institutions: the management of wages for institutions was
gradually shifting from fiscal allocation to enterprise-like
approaches. Generally speaking, wages of institution employees
consist of base rates, various allowances and bonuses.
(2)Urban Collective Economic Units
Before reforms in wage, wage rates of urban collective economic
units had about the same degree of freedom like the state-owned
enterprises in determining their wage rates. In 1995 an employment
labor contract system was implemented. In 1998 throughout the
country collective enterprises were to be transformed into
joint-equity companies. Under such conditions the majority part of
the employees' income was from their stock rights and earnings from
work. The wage distribution mechanism of the collective enterprises
became similar to that of the other non-state-owned enterprises
such as the enterprises with foreign participation and individual
enterprises. Therefore, we may say by 2001 the freely determined
wage rates were basically realized in urban collective economic
units.
(3)Non-State-Owned Economic Units
Non-state-owned economic units include private, individual and
foreign participated enterprises. The establishment of
non-state-owned economic units was basically the outcome of
market-oriented behavior. The labor wage rates were determined by
supply and demand situations in the labor market, therefore the
wage rates were freely determined.
According to the sampling by the China Enterprise Evaluation
Association and the Research Office of the State Economic and Trade
Commission, the proportion of freely determined wage rates and
bonuses in the sample enterprises accounted for 70.2 percent in
1993, which rose to 81.35 percent in 2001. Among them 71.6 percent
of the state-owned enterprises had their wage rates determined by
themselves.
2. Proportion of Non-Farm Income in Total Net Income of
Peasants
In the wake of the deepening of rural and urban reforms, a large
number of rural surplus laborers shifted from agriculture to urban
and township enterprises or other non-agricultural fields, with the
sources of peasants' income becoming more and more diversified. The
peasants' income is hereby divided into farm and non-farm incomes,
and the proportion of non-farm income in the peasants' net income
is used to show the market-determined income of the peasants.
3. Workers' Negotiation Ability and the Role of Trade
Union
(1) Workers' Negotiation Ability
Under the planned economy, labor's wage rates were determined by
the government. Where the work remuneration is concerned the
employees of enterprises almost had no negotiation ability at all.
With the wage rates becoming more market determined, the employees
could ask for the wage rates that were consistent to their
competence and performance; moreover, with more laws and
regulations being promulgated and improved, in cases of dispute
between the employer and the employee, the labor may strive for
their own rights and interests by legal means.
In 1992, the system for bargaining of wage rates was no mature,
and relevant laws and regulations were not yet formulated. In July
1994, the Eighth Session of the Eighth National People's Congress
passed the Labor Law of the People's Republic of China. After that,
labor arbitration institutions were set up at various localities.
In the past two years, the employees started to safeguard their own
rights and interests by taking legal measures in cases of dispute
over wage rates and benefits. From 2000 to 2001 the number of labor
dispute cases treated surpassed an annual average of 140,000,
involving over 400,000 persons. Most of these cases were complaints
filed by the employees, and half of these cases were about
remuneration and benefit for the employees.
(2) Role of Trade Union
Trade union is an important institution for protecting the
workers' employment rights and interests. At the beginning of the
reforms, the employees were not very conscious about protecting
their own rights and interests, and the trade union was merely a
managing institution attached to the factory in no position of
representing the employees in cases of disputes with the
management.
In recent years, trade union's role in representing the
employees' interests has been reinforced both in state-owned and
non-state-owned enterprises. In labor dispute committees and labor
arbitration committees established at various localities, trade
union is an important negotiator representing the employees'
interests. In 2000, nearly 700,000 person-times of trade union and
employee representatives were present in labor dispute mediation
committees around the country, and 16,000 person-times of trade
union representatives were present in the labor dispute arbitration
committee, 14,000 person-times of trade union cadres were granted
the qualification of labor dispute arbitrators, and over 2O,000
labor dispute cases were attended by the arbitrators from trade
unions.
(Ⅲ)Freedom in the Flow of Labor
Freedom in flow of labor reflects whether system barriers exist
in trans-regional flow of labor force. It is used in determining
the availability of a unified national labor market and the level
of its development. The following explanation is based on two
indicators of our choice:
1 .Proportion of Inter-provincial Migration Population
in the Total Population
Since the coastal areas in East China were opened earlier and
underwent more dynamic reforms, they are developing far faster than
the central and western areas, and their per capita incomes are
much higher. As a result, with the reforms in household
registration system and the policies encouraging migration of
population, large numbers of people from the central and western
areas are migrating to the developed provinces and cities in the
east. Statistics obtained from the fourth national census in 1990
show that in the five years between 1985 and 1990, 10.836 million
people were involved in inter-provincial migration all over China,
with an average annual inter-provincial migration population of
only 2.16 million person-times. Statistics obtained from the fifth
national census in 2000 show, in the year 2000, about 60 million
people were involved in inter-provincial migration, of which
Guangdong Province received about a net 11 million, Shanghai
received about a net 3.6 million and Beijing about a net 2.8
million.
2.The Proportion of Differential Between Permanent
Residents and Registered Residents in Total Population of
Registered Residents (weighted average of all
provinces)
The proportion taken in the total population of registered
residents of an area by the differential between permanent
residents and registered residents is also an important indicator
reflecting labor flow.
3. Variation in Employment Shifting Between
Industries
In some of the highly developed market economy countries,
employees in average will change many jobs in their lifetime. With
the concept of market economy becoming more and more deep-rooted in
China and with the improvement in the labor security system, more
and more frequent job shifting is taking place. In the Table below
the variation in the employment shifting between trades is used to
get a rough idea of increased changes of jobs among employees.
(Ⅴ) Differences in Regional Economic Standards as
Reflected by Labor's Wage Rates Versus Freely Determined Wage Rates
as Reflected by Regional Differences in Income
Standards
The growth rates of various regions of China are quite
different, resulting in great differences in average labor wage
rates across regions. Such differences are the result of nationwide
allocation of resources by the market mechanism. The following is
an attempt to show the differences of economic growth among
provinces and cities by giving the standard deviation a1 of average
per capita GDP of different provinces and cities and the variation
coefficient (the ratio a1/E1 of the standard deviation of average
per capita GDP and the mean value of per capita GDP) of average per
capita GDP of provinces and cities; the differences in wage rates
of different provinces and cities by using the standard deviation
a2 and the variant coefficient (the ratio a2/E2 of the mean value
of the standard deviation of average wage rates and the average
wage rates )of the average wage rates among provinces and cities;
and the differences in economic standards among different regions
as reflected labor wage rates by using correlation coefficient s
between the per capita GDP of various provinces and cities and the
average wage rates of various provinces
Data from the years of 1992, 2000 and 2001 indicate that the
differences in economic growth and in wage rates among provinces
and cities are expanding gradually: the per capita GDP variant
coefficient rose from 0.7000 in 1992 to 0.7642 in 2001; the variant
coefficient of average wage rates was 0.1816 in 1992 and became
0.3317 in 2001; the correlation coefficient between per capita GDP
and average wage rates of all provinces rose from 0.7369 to 0.8130
in 2000. The unbalance in economic development among all regions is
expanding, to he coupled with expanded differences in income
levels. In this stage, the wage rates system unified by
administrative measures was broken as a result of allocation of
resources by market mechanism. The conditions for economic
development were innately different for different regions; the
market-oriented competition will inevitably widen the differences
in economic development and income standards among different
regions.
In 2001, the correlation coefficient was 0.7667 between the per
capita GDP of all provinces and cities and the average wage rates
of all provinces, while the same figure for year 2000 was 0.8130,
meaning a drop in that value in 2001, a fact that couldn't have had
absolutely nothing to do with the government's regional
preferential policies for the grand development of the western
region launched in that year. This fact also implies another aspect
in the formation of labor flow and market-determined wage rates,
i.e., when the labor market is growing more mature for the
competition to be fully activated, gaps between wage rates of same
types of labor tend to narrow down. What remains to be explained
is, of course, that in selecting the above indicators, efforts were
made so that the extent to which labor and wage rates were
determined by market is precisely reflected, at the same time we
made sure that the data were available, comparable and
feasible.
(China.org.cn November 7, 2003)
