evaluation of the emerging Chinese labor market conditions.
2. Transition of the Chinese labor market
2.1 Breaking the Iron Rice Bowl
the process of shifting from a planned economy to a market based one the government significantly reformed the labor market, gradually dismantling the government-controlled system to form a more competitive market. According to Fleisher and Yang (2003) labor market reform has been both the source and a major limitation - perhaps the major limitation of China s economic transition . Prior to 1978 the organization of labor was centered on the work unit (danwei), which was at the core of the Chinese iron rice bowl. Under this concept workers would be assigned to a work unit functioning as a sort of community within the society (xiao she hui), providing its workers and their families with a wide range of social benefits. Generally, these benefits included lifelong employment, low wages in accordance to the centralized wage grid system, and additional benefits such has housing, schooling, and health care. This system detached wages and employment from company performance, establishing nearly complete security (Saha, 2006). Such extensive welfare, however, was only granted to members of the danwei, and variations between different enterprises were notable. The system did not exempt workers from all kind of hardship (eg during the Great Leap Forward), but for the most provided basic care for its members. Additionally, the rural population did not have access to such industrial welfare provisions, having their basic needs provided through rural people s communes instead (Shen, 2007). The basic concept between the urban and rural forms of organization is similar in nature while differing in quality. Because of this it is common to use the term danwei for urban as well as rural areas in current literature; the same will be done in this paper.
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The state played a significant part in the welfare system undermining any type of flexible markets using government paternalism to shield the working population by guaranteeing social welfare and at the same time limiting widespread inequality. Under the socialist economic regime the majority of China s labor force was employed either in rural communes or in urban state-owned enterprises (SOE), but the distribution of jobs has significantly changed since (Fleisher and Yang , 2003). As the Chinese government continued its marketization efforts of the Chinese economy, benefits provided for by the danwei have gradually disappeared. In the process of marketization private enterprises have become increasingly important for employment, while at the same time government con...
