workers from rural areas staying in urban areas for six months or longer continued to grow from 78.5 million in 2000 to 145 million in 2009, the growth rate decreased over time. In the meantime, the employment of urban locals continued to increase, and its growth rate remained constant. In 2009, nearly one-third of urban employees were rural migrants and they were dominant in some sectors such as construction. At the same time, migrant workers tend to reside and work in cities temporarily (Zhang et al. 2009). In any event, urban sectors can no longer afford a retreat of such a large proportion of the labor force.
According to a survey conducted by the National Bureau of Statistics (NBS) in early 2009, at the end of 2008, rural workers working in non-agricultural sectors for more than six months totaled 225 million, of which 140 million were migrant workers across townships, accounting for 62.3 per cent of total farmers-turned-workers, and 85 million, or 37.7 per cent, worked in non-agricultural sectors within home townships. Among migrant workers, 112 million still had family members in home villages, accounting for 79.6 per cent of all migrants, while 28.6 million migrated from home villages with their entire families, accounting for 20.4 per cent (Sheng 2009).
The above-described two trends have altered the characteristics of labor migration after the Lewis turning point. In the period before the turning point, the cyclical changes of demand of the urban and non-agricultural sectors for labor often bring about a reverse rise and fall of the labor force engaged in agriculture. The amount of agricultural employment is not determined by the sector’s need per se but statistically is a residual term, and thus, agriculture still serves as a pool of surplus labor. After the turning point, however, fluctuations in the labor demand of urban and non-agricultural sectors no longer cause reverse changes in agricultural employment, because the urban and non-agricultural sectors gain the capacity to accommodate short-term labor market fluctuations. As a result, agriculture no longer provides a pool of surplus labor.
As shown in Figure 2, the correlation between the growth rates of non-agricultural employment and of agricultural employment differs statistically before and after the
turning-point years. In the period before the mid-1990s, growth rates of non-agricultural and agricultural employment showed drastically fluctuating and positive growth rates, because the labor force continued to grow. While the rural surplus labor
force faced the pressure of transferring and the constraints of non-agricultural employment opportunities, the two employment growth rates showed no stable correlation. After the mid-1990s, while growth rates of non-agricultural and agricultural employment became more stable, they also became significantly and negatively correlated. During the period 1998?C2008, the correlation coefficient between the growth rate of non-agricultural employment and the growth rate of one year lagged agricultural employment was ?C0.748, with declining agricultural employment in most years. The most significant change happened in 2004, when the high growth rate of non-agricultural employment and the negative growth rate of agricultural employment were highly correlated. In conclusion, while we consider the Lewis turning point to be a transitional period, the year 2004 is still indicative of that period beginning.
III. The end of the ‘Todaro dogma’
Michael Todaro is widely known for his profound research on internal migration in developing countries. His most influential theory is the so-called “Todaro paradox” (Todaro
1969; Harris and Todaro 1970). He argues that it is the differential of expected wages between the rural and urban sectors that encourages rural workers to migrate. Since the urban expected wage is adjusted by the urban unemployment rate, the paradox is this: efforts made by the government to reduce the unemployment rate will increase the difference of expected wages between rural and urban sectors and thus motivate more migration, which, in turn, can lead to more unemployment. A further implication is that any efforts made to improve the status of migrants working in urban areas can encourage more migration, thereby deteriorating the potential for migrants to find employment and residence in urban areas. Accordingly, the “Todaro paradox” has been translated into a “Todaro dogma,” which views labor migration as a more “come and go” pattern rather than of permanent settlement, and thus, the implementation of policies aiming to control and even restrict the process of rural-to-urban migration is regularly implied.②
The Todaro paradox rests on the assumption that there is no unemployment in the agricultural sector―namely, that agriculture is a pool for depositing the surplus labor force. Correspondingly, the Todaro dogma tends to mitigate the social
risks potentially raised by labor migration, through balancing the push and pull forces between the rural and urban sectors, and especially through strengthening the role of rural areas in absorbing surplus workers. From the viewpoint of economic development, such an assumption is insufficient to conduct a dynamic analysis, because it fails to take into account the fact that the agricultural share of employment declines over time in the development of the dual economy.
As mentioned previously, the Chinese economy is already in the stage of development expressed by the Lewis turning point, which suggests that the Todaro paradox might no longer hold. Thus, there is a need to revise the policy orientation implied by the Todaro dogma. Before the Lewis turning point arrived, during each period when the urban sector suffered a cyclical downturn, migrant workers frequently returned to their rural homes and their contracted land provided them with shelter and some employment support. That mechanism prevented floating workers from becoming unemployed, and hence, from falling into absolute poverty. Given the lack of social protection for migrant workers, this has indeed served as a buffer against economic and social risks. Once agriculture ceases to serve as a pool of surplus labor,
however, and labor migration no longer follows a come-and-go pattern, this mechanism for risk alleviation will no longer exist. The employment adjustment of Chinese migrant workers in the face of the global financial crisis resonates with international experience. After a short break resulting from the Chinese New Year holiday in early 2009, migrant workers immediately returned back to their urban jobs, and through relocation from manufacturing to service and construction sectors, they achieved compa
Urbanization with Chinese Characteristics
