Yet again, the Chinese government is contemplating reform of its Hukou system, which defines the place of residency of its citizens through household registration. It was established in 1955 as a way to control overcrowding due to migration to urban areas from rural areas. To obtain work permits as well as health, education, and other benefits, persons had to be registered as residents in defined areas. Two main classifications were used, "urban" and "rural." However, this system has sustained much strain as China's economic fortunes gathered steam--especially since progress has been concentrated in urban (and coastal) areas. In effect, the Hukou system has become a virtual caste system wherein those registered in urban areas have had more opportunities to take part in China's economic growth while those registered in rural areas have been left behind. It is estimated that between 100-200 million people have disregarded Hukou in seeking employment in urban areas, making for a vast floating population of migrants. Many employers in cities seeking labor have hired these migrants without proper Hukou documentation due to either tight labor supplies or benefits derived from employing workers with few (if any) labor rights or benefits due to their classification.
In a 2004 NBER paper, John Whalley and Shunming Zhang studied the effects of the Hukou system on Chinese income inequality, which has been growing in recent years due to earnings in rural areas being left behind by those in urban areas. Even when accounting for efficiency differences, they found that the Gini coefficient with an urban-rural split would be reduced by sixteen percentage points in their model if the system were abolished. Even larger improvements were to be found on an interregional basis. However, this study relied mostly on Chinese statistical data and did not account for the large floating population:
Another study by Xiaogang Wu and Donald Treiman (2004) noted that being able to change one's Hukou status was an important condition for upward social mobility, and that education and party membership were the main determinants of successfully undergoing this change. (Their study used binary logistic regression.) Clearly, then, there is a large political economy assigned to Hukou status. Unsurprisingly, the system has become largely unpopular in China. Although the government has been trying to reform the system since 1992, large-scale changes have not been implemented so far, though certain provinces have gone further in disestablishing it. Some officials fear that too fast a movement towards abolishing the system will lead to slums in urban areas. However, this matter appears to have priority in government circles as inequality continues to rise unchecked in China, setting the stage for even more social disturbances:
In a 2004 NBER paper, John Whalley and Shunming Zhang studied the effects of the Hukou system on Chinese income inequality, which has been growing in recent years due to earnings in rural areas being left behind by those in urban areas. Even when accounting for efficiency differences, they found that the Gini coefficient with an urban-rural split would be reduced by sixteen percentage points in their model if the system were abolished. Even larger improvements were to be found on an interregional basis. However, this study relied mostly on Chinese statistical data and did not account for the large floating population:
Another study by Xiaogang Wu and Donald Treiman (2004) noted that being able to change one's Hukou status was an important condition for upward social mobility, and that education and party membership were the main determinants of successfully undergoing this change. (Their study used binary logistic regression.) Clearly, then, there is a large political economy assigned to Hukou status. Unsurprisingly, the system has become largely unpopular in China. Although the government has been trying to reform the system since 1992, large-scale changes have not been implemented so far, though certain provinces have gone further in disestablishing it. Some officials fear that too fast a movement towards abolishing the system will lead to slums in urban areas. However, this matter appears to have priority in government circles as inequality continues to rise unchecked in China, setting the stage for even more social disturbances:
Over the past several years, the PRC government has tried to improve the protection of workers' rights. In particular, the State Council and MLSS have issued directives to clear wage arrears for migrant workers whose previously ambiguous legal status and inadequate access to legal channels made them susceptible to abuse. The problem of unpaid wages for migrant workers may be particularly important because of their large numbers—officially estimated to be 120 million—and because the problem appears to be widespread. According to a State Council survey report released in April 2006, 51 percent of rural migrant workers reported "sometimes" or "frequently" having difficulty getting paid on time, and 76 percent said that they had not received overtime pay owed to them.
