16 Lin Xiumei and Wang Lei: A Study of the Non-linear Dynamic Correlation between Economic Growth and Unemployment Rate — Reconsideration of Okun’s Law, The Journal of Quantitative Economics, 2006 (1), pp. 64–73.
17 Zou Wei and Hu Xuan: The Deviation of China’s Economy against Okun’s Law and the Study of Unemployment, The Journal of World Economy, 2003 (6), pp. 40–47+80.
18 Hu Yongtai: China’s Total Factor Productivity: The First Role of the Re-allocation of the Agricultural Labor Force, Economic Research Journal, 1998 (3), pp. 33–41.
19 Young, A.: Gold into Base Metals: The Growth of Productivity in the People’s Republic of China during the Reform Period, Journal of Political Economy, 2003 (111), 1220–1261.
20 Li Yang and Yin Jianfeng: High Savings, High Investments, and China’s Economic Growth in the Process of Labor Transfer, Economic Research Journal, 2005 (2), pp. 4–15+25.
21 Li Daokui, Liu Linlin and Wang Hongling: The U Curve of Labor Share in the GDP during Economic Development, Economic Research Journal, 2009 (1), pp. 71–83.
Chapter 2
Overview of the Transfer of Agricultural Labor
I. The Evolution of the Transfer of Agricultural Labor
Before the reform and opening-up, China had implemented a stringent household registration system to strictly control the flow of farmers into cities, resulting in a separated urban–rural labor market. However, China has gradually relaxed the restrictions on the movement of farmers in policy since the reform and opening-up. The agricultural labor force has been shifting to the non-agricultural sector at an annual rate of 8 million for more than 30 years. In 2014, the number of migrant workers reached 274 million. Figure 2.1 shows the scale of the transfer of agricultural labor and the proportion of migrant workers in the total labor force, fully revealing that the transfer of agricultural labor has greatly backed up the development of China’s non-agricultural sector at least in terms of labor supply. Data show that migrant workers accounted for an average of 42.7% of the employed population in the non-agricultural sector from 1985 to 2014, and the ratio has been on the rise, especially from 33.6% in 1990 to 50.1% in 2006 and to 50.9% in 2013.
Figure 2.1. The total number of migrant workers in China and their proportion in the total number of the employed population (1985–2014).
Source: The data for the period 2008–2014 were extracted from the National Monitoring Survey Report on Migrant Workers by the National Bureau of Statistics over the years; for the data regarding the period 1985–2007, see Lu Feng: Reflection on Economic Catch-up by a Large Country — An Understanding of China’s Open Macro Economy (2003–2013) (Volume 1), Peking University Press, 2014, Edition 1.1
Besides, the transfer of agricultural labor has also been constantly strengthened, and it has experienced a gradual process from rural non-agricultural sectors to small towns and township enterprises, and finally trans-provincial areas.2 Due to the shift from local employment to migrant employment, the transfer of agricultural labor expands at a deeper level and on a wider scope. For instance, the outgoing country workers only accounted for 12% of the group of migrant workers in 1985; this ratio rose to 63%–64% around 2002, and then remained mostly stable.3 Figure 2.2 also clearly shows this development. Therefore, both at the industrial level and at the spatial level, the allocation efficiency of China’s labor resources continues to improve.
The continuous large-scale transfer of agricultural labor has not only completely changed the fundamental characteristics and the efficiency of the configuration of China’s labor market but also profoundly affected China’s investment, savings, technological progress, urban–rural income distribution and macroeconomic fluctuations, and more importantly, it has played a vital role in the rapid development of urban sectors. Research shows that the transfer of agricultural labor is closely associated with the improvement of China’s total factor productivity,4 the rapid development and exportation of the manufacturing industry,5 the high savings rate and the high rate of investment,6 the change in the pattern of income distribution7 and other important macroeconomic characteristic phenomena. Du Yang et al. discovered through their latest research that the flow of the labor force from rural areas to urban areas is conducive to expanding the size of the labor market and improving the total factor productivity of the urban economy. The net benefits brought by the flow of labor are still considerable, despite the negative impacts on the capital–output ratio and working hours.9
Figure 2.2. The transfer of China’s agricultural labor (1985–2014).
Source: The data for the period 2008–2014 were extracted from the National Monitoring Survey Report on Migrant Workers by the National Bureau of Statistics over the years; for the data regarding the period 1985–2007, see Lu Feng: Reflection on the Economic Catch-up by a Large Country — An Understanding of China’s Open Macro Economy (2003–2013) (Volume 1), Peking University Press, 2014, Edition 1.8
In the future, there is still a lot of room for the further transfer of agricultural labor in China. Similar to the extensive international experience, the proportion of China’s agricultural labor force has fallen since the reform and opening-up. Over the past 30 years and more, the proportion of the agricultural labor force has decreased by an average of more than 1 percentage point annually, from over 70% on the eve of the reform to about 31.4% in 2013. The international experience reveals that the proportion of the agricultural labor force in developed countries usually drops to less than 10% (see Figure 2.3) with the improvement of the level of economic development. Over the past century, for instance, the average proportion of the agricultural labor force in Organisation for Economic Co-operation and Development (OECD) countries has declined from 53% to about 10% today. Lu Feng and Yang Yewei speculate that the proportion of China’s agricultural labor force will decline to 13.6% in 2030, indicating the great potential for the transfer of China’s agricultural labor force in the next 20 years.10 Du Yang et al. also call for comprehensively intensifying the reform of the household registration system, to further promote labor mobility and “sustain the China Miracle by reaping the dividends from Hukou reforms”.11
Figure 2.3. The level of economic development of each country and the proportion of agricultural labor force.
Source: World Bank WDI Database.
II. Driving Factors for the Transfer of Agricultural Labor
Fresh and valuable materials have been provided by the practical experience of economic development and labor transfer during the period of China’s reform and opening-up to understand the
