Journal Article

IDS Bulletin Vol. 39 Nos. 2

The Challenge of Informality: Perspectives on China’s Changing Labour Market

Published on 1 May 2008

Labour is only another name for a human activity which goes with life itself, which in its turn is not produced for sale but for entirely different reasons … the alleged commodity ‘labour power’ cannot be shoved about, used indiscriminately or even left unused, without affecting also the human individual who happens to be the bearer of this peculiar commodity. (Polanyi 1957: 75, 76)

China’s transformation from a closed, planned economy to the leading global manufacturer of export products has entailed a restructuring of economic and social organisation on a massive scale. A central feature of this process has been the recommodification of labour. The ‘cradle to grave’ protections afforded to urban employees through the iron rice bowl have been dismantled. Rural producers, always more exposed to the uncertainties of nature and the extractive demands of an industrialising state, were nonetheless provided with basic security through the collective organisation of production and a guaranteed right to land. This system of economic organisation, while institutionalising inequalities between urban state sector employees and others (particularly rural residents) provided basic guarantees of economic security and access to minimal social provisioning. Commercialisation and decollectivisation have increased the exposure of rural producers to markets as new and volatile sources of risk, while the position of the former urban ‘labour aristocracy’ has been reduced to that of workers’ selling a commodity – labour – in an increasingly competitive market.

Through these rapid changes, labour has re-emerged as an important, if not the main, asset of the working poor, providing an important link between economic growth and distributional or welfare outcomes, particularly for lower income groups. A common assumption (challenged by articles in this IDS Bulletin) is that reforms aimed at securing free and flexible labour markets should generate labour intensive growth trajectories necessary for poverty reduction. While China may appear to fit this pattern – having seen rapid growth, with both an expansion of labour intensive production and poverty reduction – it is nonetheless questionable whether the labour elasticity of growth has been sufficiently high, pro-poor or sustainable (see Rodgers, this IDS Bulletin). Furthermore, job creation alone may not be enough: the nature and quality of jobs is also critical for generating pro-poor or equitable development outcomes.

What is clear in the Chinese case is that the conditions under which labour is supplied, exchanged and rewarded in this emerging ‘market’ have changed beyond recognition since the start of economic reform. Negotiations over the value of, or returns to, labour, and the distribution of these gains; the role of the state in protecting workers or incentivising employers; and the restructuring of social security, are some of the elements contributing to a major social transformation, involving protest and struggle over lost entitlements, greater competition for jobs and opportunities, and a re-definition of the role of household, society and state in the reproduction of labour.

One significant – though under-researched – feature of this transformation is the rise in ‘informal’ employment. While defining and measuring informal employment, particularly given currently available statistics, is not straightforward, there are a number of different angles from which to interpret this aspect of China’s changing economy. It is part of the story of structural transformation involving the unprecedented speed of transfer of people out of agriculture into off-farm employment,2 and of the emergence of a labour market that appears more closely to approximate a competitive neoclassical model.

This article focuses on the rise of ‘informality’ in China’s employment system; it explores the extent to which conventional labour economic models capture or explain the reality of this ‘informalisation’ process, and considers the implications for employment and social protection. Connecting with the core questions of this IDS Bulletin, the article explores what drives precariousness of incomes and jobs in the context of China’s labour market changes. The article concludes by discussing what this means for research – conceptual, statistical measurement, data collection and empirical analysis – and for policy.

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This article comes from the IDS Bulletin 39.2 (2008) The Challenge of Informality: Perspectives on China’s Changing Labour Market

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Cook, S. (2008) The Challenge of Informality: Perspectives on China's Changing Labour Market. IDS Bulletin 39(2): 48-56


Sarah Cook

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Institute of Development Studies
Cook, Sarah


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