Problems of the labour market and employment policy in the People Republic of China

Abstract

Until the end of the seventies, the PRC was able to provide full employment for its high and quickly rising population only because of the large amount of hidden unemployment. Then, huge number of the labour force was still in agriculture. During the reforms of the eighties, however, lot of peasants lost employment resulting from increasing labour productivity. On the other hand, the reforms also created new employment possibilities in the private economy as well as in the secondary and tertiary sector. A solution for the employment problem in China should be further adequate expansion of these sectors, and, in the long run, shortening of working time, and education. Today, two kinds of labour markets are existing in China: Whereas there is an open market in the countryside and in the so-called second economy of the cities, the labour market in the so-called first economy of the cities, i.e. the state and the collective sector, is closed. Although the reforms theoretically provided the conditions for the opening of the whole labour market, some very important conditions are still missing in reality, namely the independence of the enterprises from administrative organs and social welfare system. Therefore, the reform of the employment system can only proceed step by step. Chinese economists lay emphasis on working contracts, employment of surplus labour within the enterprise, social unemployment benefits etc. The authors, however, expect that the reform of the employment system will meet with many difficulties resulting from the pre-reform economic system.