China's Rise in Historical Perspective by Brantly Womack

Author:Brantly Womack
Language: eng
Format: epub
Publisher: Rowman & Littlefield Publishers

THE TURNING POINT

China is still a majority rural society, but it is moving rapidly in the direction of a predominantly urban society. By the end of 2008, China’s urban dwellers made up 46 percent of the population, and the share of the labor force in agriculture dropped below 40 percent. What difference does this transformation make? A long-standing concept from the development economics literature can illuminate the significance. According to the Lewis-Fei-Ranis “surplus labor” model, a key moment in the development process is reached when growing urban employment economy finally begins to drain the reservoir of underemployed farmers in the countryside. Before this point, the apparently inexhaustible supply of low-cost labor means that employers can hire more workers without raising wages (the supply is infinitely elastic). Even as cities grow and corporate profits soar, workers’ wages stagnate and huge income gaps open up between capitalists and workers. Eventually, though, a “turning point” is reached: with labor supplies no longer inexhaustible, wages for unskilled workers begin to be pushed up by the operation of supply and demand. Worker incomes start to climb and employers have stronger incentives to hire more educated and skilled workers.13 At the same time, with urbanization, a larger share of new entrants to the labor force will have received a high-quality urban education. The developing economy begins to make a swift transition not only to higher incomes, but also to a better skilled and more equal society.

This is a useful construct for understanding what is happening in China. To be sure, the concepts have been criticized in the development economics field. It is not clear that workers in the farm sector were truly “surplus” before they migrated to cities; and the “turning point” is more like a gradual shift in conditions rather than an abrupt change. When the supply of young workers in accessible regions is exhausted, there may still be large pools of surplus older workers, especially in remote areas.14 But the concept still has explanatory power for China (and for other East Asian developing economies). A flood of migration from the countryside to urban factories has powered the Chinese industrial explosion of the past twenty years. Pulled by powerful economic forces, millions of rural Chinese moved to cities and factory towns each year. Throughout the 1990s the pace accelerated, until in the 2002–2007 period, around 15 million Chinese migrated annually. Yet through most of this period, wages for unskilled labor stayed low, because of the virtually unlimited supplies of available labor.15

Around 2004–2005, evidence started to appear that China might be approaching the “turning point.” For the first time, factories in the Pearl River and Yangzi River deltas began to experience difficulty attracting workers. It was no longer enough to simply post a help-wanted sign. Factories found they had to institute modest improvements in working conditions and wages to attract the workers they needed. Moreover, this change in labor market conditions was plausibly connected to the exhaustion of the most accessible eligible migrants. For example, a

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.