BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/20
Migrant workers lack official residency in the cities where they work due to China’s household registration system (hukou). When work ends, they must often return to their rural domicile as many social services are tied to residency. While migrant workers increase labour market flexibility, they make it hard to judge labour market conditions, as migrant workers are not included in official unemployment figures.
Migrant workers traditionally have had little education, so they ended up in low-wage fields such as assembly, manufacturing or construction. The nearly endless flow of low-wage migrant workers to cities in past decades has helped fuel the Chinese economy’s high growth and avoid large-scale labour shortages, even in coastal regions where growth was highest. The surge in wages, however, suggests pressure on labour markets.
Slowing growth in the number of migrant workers indicates structural change in China’s labour markets. The demand for low-skill cheap labour has fallen as assembly work has shifted to countries with lower labour costs. The Chinese economy’s development and structural changes have shifted the focus away from production in low value-added branches to e.g. the service sector. Lower growth in the number of migrant workers also indicates that workers are increasingly finding work near their homes, so moving to big cities is no longer necessary.