Critical Evaluation of the New Rural-Urban Labor Mobility in China: Reasons and Effect of Rural-Urban Labor Migration on Urban and Rural Labor Market

Abstract

With the reforms of the Chinese economy, an enormous new moving population of rural-urban migrants is transforming the rural and urban labor force. Expected rural-urban income differences are used instead of absolute income diversity, namely the migrant is motivated by predictable income streams over time rather than by current earnings. Also, the employment opportunity is not exclusive determinant for rural-urban migration and some factors from both rural and urban sectors should be taken into account. The relationship between urban resident and rural migrant employment is consistent with the existence of continued labor market segmentation. It is also the increasing competition between the two groups. Meanwhile, many evidences indicate that there are two simultaneous phenomena which are surplus labor in rural areas and rising rural migrant wages in urban areas.

Full text

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Critical Evaluation of the New Rural-Urban Labor Mobility in China:
Reasons and Effect of Rural-Urban Labor Migration on Urban and
Rural Labor Market
Lili Ma
Gansu Forestry Department, No. 1 Qin'an Road, Chengguan District, Lanzhou, Gansu, China
E-mail: axiyan417@yahoo.cn
Received: July 18, 2011 Accepted: November 15, 2011 Published: March 1, 2012
doi:10.5539/ass.v8n3p321 URL: http://dx.doi.org/10.5539/ass.v8n3p321
Abstract
With the reforms of the Chinese economy, an enormous new moving population of rural-urban migrants is
transforming the rural and urban labor force. Expected rural-urban income differences are used instead of
absolute income diversity, namely the migrant is motivated by predictable income streams over time rather than
by current earnings. Also, the employment opportunity is not exclusive determinant for rural-urban migration
and some factors from both rural and urban sectors should be taken into account. The relationship between urban
resident and rural migrant employment is consistent with the existence of continued labor market segmentation.
It is also the increasing competition between the two groups. Meanwhile, many evidences indicate that there are
two simultaneous phenomena which are surplus labor in rural areas and rising rural migrant wages in urban
areas.
Keywords: Labor mobility, Household responsibility system, Surplus labor, Income gap, Magnetic city, Hukou
system, Labor market segmentation
1. Background
With the increase in the demand for labor in urban areas, China’s economic reforms have led to rural-to-urban
labor migration that is unparalleled in scale. Many urban studies indicate that the floating population in a number
of metropolises such as Beijing and Shanghai, which contains both rural labor migrants and others departing
from their place of official residence, were one-third and one-fourth respectively of those cities’ inhabitants
(Appleton et al. 2002). In brief, Chinese economy reforms have triggered substantial floating population of
rural-urban migrants. Enormous voluntary rural-urban migration is transforming the cities of China and
simultaneously changing the urban labor force (Gaetano & Jacka, 2004). Depending on the neoclassical model,
more previous researches focus on exploring the massive rural-urban internal migration proceeding in China
(Seeborg, Jin & Zhu 2000). They argue that huge new floating population in China’s urban regions can provide
urban development vitality by means of affording required labor for current explosion of urban construction and
service industry (ibid). However, the rural-urban migration is similarly resulting in conflict between migrants
and urban residents because the new migrants compete fiercely with growing number of jobless urban citizens.
Additionally, urban residents consider migrants should be responsible for some issues in the process of urban
development including unemployment, traffic congestion, environmental degradation and crime. Meanwhile,
two phenomena like concurrent surplus labor in rural areas and migrant labor shortage in urban areas are
considered a puzzle. It is worth exploring the interpretation through more research.
2. Argument structure and research methods:
On the whole, quantitative and qualitative research methods are combined to serve as the way the theoretical
position is intended to approach in the essay. In terms of exploring causes of the new rural-urban labor mobility
in China, based on different category of data from China Statistical Yearbook, the large internal migration in
recent history will be presented firstly. In the second place, the study intends to state major incentives and causes
of rural-to-urban migration in China. This can be realized through analyzing many surveys with regard to
migrants’ attitudes from literature review. Besides, by means of examining the concept model of voluntary
rural-urban migration in China from qualitative aspect, the major institutional and economic forces resulting in

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the migration will be outlined in terms of rural and urban sectors. In this section, the impact of crucial changes in
the rural sector on rural-urban migration is to be examined through analyzing the data of per capita annual real
income of urban rural households and the data of number of employed person in rural areas. Also, some unique
institutions, which have restricted chance for rural migrants in cities previously, will be qualitatively analyzed. In
the third place, possible positive and negative relationships between rural migrant employment and urban
residents will be set out. This part will be presented by means of analysis of advantages of rural-urban migration
for urban economics reform and conflict between rural labor and urban labor. In terms of discovering whether
the relationship between migrants and urban residents is one of segmentation or competition in the labor market,
empirical findings on the attitudes of companies and of workers will be presented with help of urban survey.
Finally, the study will briefly analyze two simultaneous phenomena which are surplus labor in rural areas and
migrant labor shortage in urban areas.
3. A summary of authors’ viewpoint
Currently, some researches devote to exploring causes for the rural-urban labor mobility because it is, in some
sense, important to evaluate the most essential reasons because they are playing instructing roles in term of
policy making. Under the circumstances, Seeborg, Jin & Zhu (2000) conducted a study the new rural-urban labor
mobility in China: Causes and implication. This research aimed to explore some of the most dominant reasons
for the occurrence of the floating population in China, especially from aspect of major economic forces and
policy changes. The study revealed that the neoclassical model only is not sufficient to clarify the substantial
rural-urban internal migration proceeding in China. As a substitute, authors hold that both institutional
economics and sociological theories of segmented markets can be used to complement the standard neoclassical
explanation. Additionally, the study focused on the impact of Chinese policy reforms in both rural and urban
areas on balkanization of labor markets. It asserted that these reforms decreased the fragmentation of labor
markets and created more employment opportunities for many rural-urban migrants. To the extent that this
research is exploratory, result of this study provide insights into the importance of recognizing causes and
implication of the new rural-urban labor mobility in China. However several limitations must be considered in
interpreting the study findings.
4. Internal migration in recent history
The precise size of the floating population is in dispute (Cai & Wang 2008). However, it is undoubtedly that the
floating population makes contributions to the urbanization of China. Table 1 presents the large internal
migration in recent history of China. It indicates population and employment statistics for urban and rural areas
from 2001 to 2008 (National Bureau of Statistics of China, 2009). Over that 8-year period, the official urban
population increased from 37.7% to 45.7% of the total population. It is obvious from these data that there is
enormous urbanization, and from all accounts, rural-urban migration is playing an increasingly role in the
process. The table also shows the proportion of urban employment in total employment increase from 32.8% to
39% among 2001 to 2008. The percentage of rural employment decreases from 67.2% to 61% during same
period, compared with urban employment.
5. Incentives and causes of rural-to-urban migration in China
In order to explore incentives and causes of rural-to-urban migration in China, Seeborg, Jin & Zhu (2000) take
advantage of Michael Todaro’s model of internal migration as a starting point (Seeborg, Jin & Zhu 2000). Based
on this model, they hold that the model undoubtedly has disadvantages because it merely presents those potential
migrants are facing a single urban labor market with a certain possibility of employment (ibid). Accordingly,
authors considered that potential migrants are confronted with four elementary consequences: 1) employment in
the SOE sector; 2) employment in the non-SOE contract wage sector; 3) employment in the informal or urban
traditional sector; or 4) unemployment. And then authors partition the urban market into the four sectors above
for the purpose of analysis (ibid). However, authors did not search many crucial incentives of rural-to-urban
migration in China, and many potential causes are ignored from rural and urban aspects. The following part will
discuss the underlying factors encouraging contemporary rural-urban migration in China.
5.1 Rural sector
5.1.1 The effect of household responsibility system
Many factors of rural sector have been considered as incentives to push and pull rural workers to migrate to the
urban area. The first influential factor is the household responsibility system which distributes previously
collectivized land among rural households (Knight & Yueh 2002). According to Seeborg, Jin& Zhu (2000),
household responsibility system resulted in increase in agricultural procurement prices, and these agricultural

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market reforms increased farmers’ incentives to engage in agriculture and thus decrease rural-urban migration
(Seeborg, Jin & Zhu 2000). However, household responsibility system, rather than providing jobs through the
collectivization system, the state requires each household to produce a certain quantity of grain and then buys
surplus grain at a premium of 30 to 50% (Knight & Yueh 2002). Accordingly, the household responsibility
system leads to higher work efficiency and decrease of number of workers needed on the farm. Besides, peasants
are confronted with less profits and more instability due to inadequate agricultural subsidies from government
(ibid). With the creation of the new system, many farmers lost jobs or do not have enough support from the
government. In that case, there are increasing incentives generated from the household responsibility system for
family members to seek non-agricultural work.
5.1.2 Less profitable conditions and surplus labor in agriculture
Changes in the agricultural industry have also resulted in less profitable conditions for farmers. Increasing costs
of agricultural production is triggering rural-to-urban migration (Du, Park & Wang 2005). Taking fertilizers as an
example, new fertilizers are more expensive and effective than others used in the past, which could lead to
growing cost of agricultural production, higher crop yield and decrease demand for laborers. Besides, farmers
are unable to raise the prices of crops to compensate because of government controls of price. In addition, the
arable land is declining because of overuse of fertilizers, deforestation and sale of land for industry (Du, Park &
Wang 2005). This is an issue for farmers because smaller farms per household threaten potential income that
farmers could depend on. As a result, this may generate a powerful rural push to migrate as well as enable rural
laborers to seek off-farm work to supplement their incomes. Seeborg, Jin& Zhu (2000) also hold that surplus
labor in rural areas is another reason resulting in rural-to-urban migration (Seeborg, Jin & Zhu 2000). Sustained
natural growth in the rural population and increases in productivity in agriculture contribute to a very large
surplus of labor in agriculture. Although a plenty of the surplus labor can be absorbed by the TVEs, TVEs have
not provide enough jobs to hinder the emergence of a huge surplus labor population in rural areas (ibid).
5.2 Urban sector
5.2.1 Growing income gap between urban and rural residents
Seeborg, Jin& Zhu state that ‘All other things being equal, an increase in urban –rural income ratios should
trigger an increase in migration. The huge income disparity between rural and urban areas provides enormous
incentive to the rural residents to migrate to the urban areas in search of higher living standards’ (Seeborg, Jin &
Zhu p 50 2000).
Table 2 shows per capita annual disposable income of urban households grow rapidly from 2001 to 2008
(National Bureau of Statistics of China, 2009). The figure of rural households experiences a slower increase,
compared with urban area. It is worth noting that the income gap rises from 4493.2 yuan to 11020.2 yuan during
2001 to 2008. Namely, the income gap keeps continual growth. Additionally, Engels’ coefficient of rural
households is relatively higher than urban households, which indicates that there is serious disparity between
rural and urban living standard.
With the rapid growth in China, growing income gap between urban and rural residents is a considerable
important element affecting decision of migration. This disparity has occurred because the price of farm products
is not raised to keep up with those of manufactured goods (Knight & Song 2005). Farmers hold that urban areas
could create more profits than their home village from industrialization, which is a crucial push for rural laborers
to migrate to the city. Besides, migrants from rural areas can take part in the economic growth in city and benefit
from increased job availabilities (ibid). City usually needs more workers due to expansion of manufacturing,
commercial and technological activities. Migrants are employed by the state for construction jobs and by private
industries for cheap labor. Furthermore, migrants are needed in the service industry to improve the urban living
standard by offering cheap services because these jobs could not be desirable to urban residents.
5.2.2 Magnetic city
With rapid increase in industrialization, larger corporations are attracted to chief urban areas because cities can
normally provide superior services, such as convenient transport and adequate warehousing as well as a larger
and more diversified supply of employees (Fan & Stark 2008). Accordingly, the large amount of manufacturing
enterprises and a greater concentration of them, in sequence, could provide a greater range of employment
predictions available to each worker in the larger cities. Besides, this kind of enterprise in urban area could offer
workers more training opportunities to achieve higher incomes. With one enterprise supplying inputs to other
enterprises, a greater degree of combination of manufacturing activities is created in cities (ibid). Moreover,
better infrastructure resulted from a more concentrated population could be provided in larger cities, which is

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one of the attractions for migrants from rural areas. Furthermore, there is a superior potential for urban
management because cities can attract better managers, which contributes to well-regulated living environment
for urban residents (Knight & Song 2005). Migrants from rural areas are also attracted by abundant leisure
activities, affluent entertainment facilities and other diversions from usual work activity. In addition, good
educational environment is also an important element to be considered when residents of rural areas decide to
move into urban areas.
5.3 Unique institutions restricting migration
Seeborg, Jin& Zhu (2000) argue that government policy has also contributed to encouraging rural laborers to
migrate from the countryside (Seeborg, Jin & Zhu 2000). They reported that rural-urban migration is a kind of
policy-oriented phenomenon, and migration into cities is brought by industrial campaigns or relaxation of
migration controls (ibid). However, some unique institutions, especially like hukou system, have restricted
chance for rural migrants in cities previously. Depend on hukou system, the government regulates population
movement, and people are labeled as agricultural or non-agricultural, based on occupation (Fan & Stark 2008).
Those without an urban hukou status are not entitled to employment, housing subsidies and health care from the
government because the state attempt to limit the amount of recipients of these benefits (ibid). In addition, it is
often unlikely for rural laborers to have certain education and scientific training to be permanent resident in a
city. Although these controls could have been a little relaxed and thus they allow rural workers in the city
without having urban hukou status, they are still restriction for permanent migration to the cities. One reason of
that is companies have been provided migrants more flexibility with hiring so that almost 60% of migrants are
unregistered in their cities of work (Hertel & Zhai 2006). Also, cheap labor from the countryside is brought to
urban labor market, even though these workers do not have urban status.
6. Possible relationships between rural migrant employment and urban residents
According to Seeborg, Jin& Zhu (2000), the flexible and fluid labor force plays an important role in advanced
market economics (Seeborg, Jin & Zhu 2000). Additionally, they state that this new huge new floating
population in urban areas in China provides vitality to urban development because transient population
contributes to needed labor supply for the current explosion of urban construction. Nevertheless, it is also
evident that rural-urban migration has resulted in conflict between rural migrant employment and urban resident.
That is because the new migrants to urban areas compete with increasing numbers of unemployed urban
residents who have lost their jobs due to the restructuring and privatization of state-owned enterprises. Based on
segmented labor market theory, Cai & Wang (2008) argues that insiders and outsiders are employed in different
segments of the labor market (Cai & Wang 2008). Or insiders and outsiders are on different terms and often in
different jobs if they are employed by the same firm (ibid). This theory suggests that an increasing in the demand
for labor intends to raise the demand for both insiders and outsiders. These perspectives can be applied to the
Chinese labor market. Urban workers and rural workers can be treated as insiders and outsiders respectively in a
segmented labor market (Seeborg, Jin & Zhu 2000). Because of the main institutional barrier namely hukou,
urban workers are protected by their membership of the work unit and the political economy that produces urban
prejudice and preserves urban residents (Knight & Yueh 2009). However, the fact indicates that total
employment in urban units decreased by more than five times the decrease in migrant employment in urban units,
with the percentage of migrant employment also decreasing, but only a little (Knight & Yueh 2002). Therefore,
the relationship between urban resident and rural migrant employment is consistent with the existence of
continued labor market segmentation. It is also the increasing competition between the two groups.
6.1 A positive relationship between rural migrant employment and urban residents
A positive relationship between rural migrant employment and urban residents can displays in various ways. In
the first place, both of the factors of production, urban residents labor and migrant labor, are required with an
increase in the general demand for inputs into production. In the second place, migrants and urban employments
can be complements if, for example, the workers of more urban residents, who are doing jobs specific to urban
residents, requires the employment of additional migrants, who are doing jobs specific to migrants (Fan & Stark
2008). The work force diversity is for output to be increased. Thirdly, although a decline in demand for urban
employment has no impact on migrant workers if the cause for the decline is the retrenchment of surplus labor
that exists only among urban residents, the potential political economy of urban bias can create a policy response
to the redundancy programme and the ensuring rise in the unemployment of urban residents (Hertel & Zhai
2006). Because urban workers are made redundant, city governments shrink the employment and reemployment
of migrant workers so as to give redundant workers more opportunities to find alternative jobs. On this occasion,
migrants continue to be remaining employees who are permitted only into the jobs that urban employees do not

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need. Furthermore, successful retrenchment programme raise the bargaining power of the residual urban
employees (ibid), this can strengthen their protection against migrant competition for jobs.
6.2 A negative relationship between rural migrant employment and urban residents
On the other hand, the relationship between rural migrant employment and urban residents can have negative
indication. With dismantlement of the institutional policies imposing segmentation, the lessening of restriction
on migrants results in fiercer competition in the labor market (Fan & Stark 2008). As a result, a substitution of
migrants for urban employees is generated due to relaxation of controls over migration and migrant employment.
Increased competition for employment opportunities indicates that a growth in the employment of migrants can
create a decrease in the employment of urban workers and increased unemployment amongst them. Knight &
Yueh (2009) come up with three possible forms of substitution. First, provided that urban workers are not
displaced, increase in the production of urban units needs more employment of migrants who are engaged in jobs
that were previously done by urban workers. Second, governments uphold unemployment urban workers, and
then limit the employment of migrants in order to provide jobs for the newly unemployed. Third, the relaxation
of labor market limitation enhances competition between rural migrant employment and urban residents, leading
to employers being able to substitute migrants for more costly urban workers (Knight & Yueh 2009).
7. Empirical findings on the attitudes of companies and of workers
7.1 Managerial attitudes towards migrants
According to Seeborg, Jin& Zhu (2000), Empirical findings on the attitudes of companies and workers can be
used for exploring whether the relationship between migrants and urban residents is one of segmentation or
competition in the labor market (Seeborg, Jin& Zhu 2000). There are two sources of attitudinal evidence: one
based on the viewpoints of urban employers of migrant labor at the beginning of the redundancy programme,
and the other based on the perspectives of urban workers after programme (Appleton et al. 2004). Managerial
attitudes are summarized in Table 3 (Knight & Yueh 2009). The responses illustrate that migrants and urban
residents were not in competition. Two-third of respondents holds that rural workers could not be replaced with
redundant urban employees because urban workers did not want to be engaged in jobs which were relatively
hard for them. These causes, instead of cost cutting, can be considered as the motive for employing migrants.
The migrants were recognized as complementary to, rather than substitutes for, their urban employees although
most managers were satisfied with the productive capacity of their rural employees (ibid). Also majority of
managers hold migrant workers must be trained strictly before starting and could be employed for a long term
(Appleton et al. 2004).
7.2 Urban worker attitudes towards migrants
The rudimentary attitudinal results are illustrated in Table 4 (Knight & Yueh 2009). There are symbols that,
migrants were being viewed as potential competitors by 1999. Above 70% of urban workers regarded possession
of an urban hukou thought it is less important for job search than in the past. More than 80% of urban workers
considered migrants to be no less efficient than urban workers in the same occupation. More than 80% said that
they were prepared to work alongside migrants rather than remain unemployed or xia gang. Over 50% stated that
migrants are competitors and should leave when unemployment is high. However, that only a third of the
respondents considered migrants as the cause of the high laying-off rate.
The conclusion from these attitudinal evidences is that, corporations perceived urban workers and migrants to be
complements in a segmented market instead of substitutes in a competitive one in the mid-1990. However, at the
end of the decade, an element of competition for jobs had arisen in the minds of urban workers so that they had
to fear redundancy. Moreover, the more segmented is the urban labor market, the more relevant is the
unemployment rate amongst migrants rather than amongst urban workers (Fan & Stark 2008).
8. The puzzle of rural labor surplus and migrant labor shortage in China
As mentioned before, the rural-urban migration is similarly resulting in conflict between migrants and urban
residents because the new migrants to urban areas compete fiercely with growing number of jobless urban
citizens. In the meantime, two phenomena of concurrent surplus labor in rural areas and migrant labor shortage
in urban places are considered a puzzle by researchers and worth exploring the interpretation. On the one hand,
there are many reports about migrant labor scarcity and rising migrant wages; on the other hand, predictions
suggest that a considerable pool of comparatively unskilled labor is still available in the rural sector (Appleton et
al. 2002). According to Seeborg, Jin& Zhu (2000), ‘Institutionalized and systematic discrimination is an
important reason why migrants choose to come by themselves to urban areas, leaving other family members
behind in their villages of origin’ (Seeborg, Jin & Zhu p 52 2000). It is also an important reason why increasing

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number of migration return from urban areas back to rural villages. The institutional restraints create difficulties
for migrants living in urban areas in terms of good and secure employment, housing, and accessing to public
services. Also many migrants cannot afford the high cost of living although the rural migrant wages are raised.
These aspects prevent migrant workers from bringing their families with them. They have to stay in village,
which to some extent result in surplus labor in rural areas.
9. Conclusion
In conclusion, an enormous new moving population of rural-urban migrants is transforming the rural and urban
labor force with the reforms of the Chinese economy. The precise size of the floating population is in dispute.
However, it is undoubtedly that the floating population makes contributions to the urbanization of China.
Incentives and causes of rural-to-urban migration in China can be represented in terms of urban and rural sector,
including the effect of household responsibility system, less profitable conditions and surplus labor in agriculture,
growing income gap between urban and rural residents as well as magnetic city. Except these incentives, unique
institutions are also recognized as an important factor restricting migration. With the rural–urban migration
allowed to increase to fill the employment gap, competition for work between migrants and urban residents
would have increased to cater the growth of labor demand. Based on attitudinal responses from two urban
surveys, the urban workers who recognize competition from migrants are those who are most vulnerable. The
outcomes are consistent with the presence of continued labor market segmentation as well as increasing
competition between the two groups. With the demand for migrants increase in the urban labor market, migrants
are accordingly needed in employment requiring more training, skill and experience. As a result, the system of
temporary migration will become economically inefficient (Knight& Song 2005). In order to solve this problem,
governments and employers should permit and encourage the stabilization of the migrant labor force. City living
encourages the implementation of urban attitudes and the transfer of the migrant’s social reference group from
the village to the city. As more migrants are transformed into proletarians, therefore the pressure on government
to treat them as same as urban residents will grow, and hukou privilege will consequently be eroded (ibid).
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Table 1. China’s population and labor force by area of residence (in millions)
Year Total population Percent urban Percent rural Total employment Percent urban Percent rural
2001 1276.27 37.7 62.3 730.25 32.8 67.2
2002 1284.53 39 60.9 737.40 33.6 66.4
2003 1292.27 40.5 59.5 744.32 34.4 65.6
2004 1299.88 41.8 58.2 752.00 35.2 64.8
2005 1307.56 43 57 758.25 36 64
2006 1314.48 43.9 56.1 764.00 37 63
2007 1321.29 44.9 55.1 769.90 38.1 61.9
2008 1328.02 45.7 54.3 774.80 39 61
Table 2. Per Capita Annual Income and Engel's Coefficient of Urban and Rural Households
Year Per capita annual
disposable income of
urban households
(value yuan)
Per capita annual
disposable income of
rural households (value
yuan)
Income
gap (value
yuan)
Engels’
coefficient of
urban households
(%)
Engels’
coefficient of
rural households
(%)
2001 6859.6 2366.4 4493.2 38.2 47.7
2002 7702.8 2475.6 5227.2 37.7 46.2
2003 8472.2 2622.2 5850 37.1 45.6
2004 9421.6 2936.4 6485.2 37.7 47.2
2005 10493.0 3254.9 7238.1 36.7 45.5
2006 11759.5 3587.0 8172.5 35.8 43.0
2007 13785.8 4140.4 9645.4 36.3 43.1
2008 15780.8 4760.6 11020.2 37.9 43.7
Table 3. Managerial attitudes towards migrants

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Table 4. Urban worker attitudes towards migrants