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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)
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