Migrant Workers In China: The Untold Story

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It's not easy for foreigners to meet migrant workers in China. Visitors are typically steered to giant shopping malls, ancient temples and tea ceremonies highlighting China's history. But there is also the unseen: we hear tales in the West about miserable living conditions for migrant workers, earning subsistence wages that allow billionaire Chinese investors to drive their Porsches and live in $5 million condos.

These oft-cited stories made me all the more intrigued to see their living conditions for myself during a visit to Shanghai last month. The trip was part of my MBA class on Global Economic Development, and the aim was for students to learn firsthand the differences between "state capitalism" vs. the United States' version of free markets.

One oft-cited difference is that China's rapid GDP growth rate is due in large part to a cheap labor force that draws upon migrant workers from the countryside. Indeed, 20% of its total population is comprised of migrant workers, or more than 200 million people, according to statista.com, and the number is still rising.

I wanted us to learn more about the underpinnings of the Chinese economy rather than taking in yet another iconic Buddhist temple or dining from a modern skyscraper. How important were these workers in fueling China's miraculous growth engine?

It's important to first understand a bit more about migrant workers here in China. Unlike the United States, where we can freely migrate to other cities to take jobs and eventually settle with our families, in China things operate quite differently. Every Chinese citizen is registered for a particular area of the country, in what is called a hukou system. They cannot legally become official residents in a new city unless given permission from the government. So when workers in China migrate, they must live in company provided temporary housing that gives them a lower social status. The workers can work and live there as long as a contract exists but must return home otherwise or somehow evade detection. They or their families cannot get access to government-provided health or education from areas outside their household registration zone.

For U.S. citizens, this lack of freedom may seem shocking, but from the Chinese government's perspective, it is more like envisioning the country as a corporation. Labor flows between different areas of the country are managed to maximize economic growth and stability. To put this in our perspective, people who work for large corporations in the U.S. are not able to move on a whim to regional offices in other cities. Rather, the labor pool is managed to assure a steady output of labor personnel at each corporate location. By contrast, the Chinese might compare the alternative to Calcutta, India, where the chaotic and uncontrolled influx of desperate villagers from the countryside has led to shockingly poor living conditions in the cities. These are the scenes China's ruling government wishes to avoid.

On the other hand, migrant workers are free to move from construction site to site, picking the company that pays the highest combination of wages and benefits. In that sense, the market should theoretically allow for workers' living conditions to improve over time, especially in a rapidly growing economy. Jian Chang, a Hong-Kong based economist at Barclays, has noted that the millions of migrant workers have "increasingly high expectations and more life options" in a 2013 Wall Street Journal article on China's labor shortages.

Given all this, what are the conditions for migrant workers? No doubt this is a complex question with many dimensions, but the place we visited unearthed many surprises. This was not a government sponsored tour, but a result of my numerous proddings and inquiries to our local logistics provider in China. In the end, we finally gained permission from the company through a series of lucky connections.

We visited a building site known as Rongxin & Greenland International, which was a partnership between the privately owned Rongxin company and the state-owned Greenland International. Both companies have dozens of expensive building projects across the country. In the modern lobby, a detailed scale model glowed under soft lighting, and allowed visitors to view the project from every angle. We could see a planned series of apartment towers, a hospital complex and nicely trimmed green spaces.

Most visitors never go to where the workers live, but for me this was the most interesting part. Turning down a gravel road, we headed towards what appeared a typical construction site. A 10 foot wall surrounded the dormitories, and we were warmly greeted by a manager. Walking on the concrete pavement inside the compound, we saw several dozen dorm style rooms on two levels, Motel 6 style, and doors were propped open in some. Peeking inside one of them, two to three bunk beds allowed a half dozen men a place to live and sleep. The rooms, while small and not air-conditioned, nonetheless were clean and well kept. A small company store stocked cold drinks, snacks and other sundries at prices not out of the ordinary. In all, the company employs 500 migrant workers for this project alone.

Workers on break came over to greet us with big smiles. Perhaps this visit was as interesting for them as it was for us. They were dressed with relatively new clothes that one would find at Walmart or Target, and nice tennis shoes. But most surprisingly, many of them had smartphones. On our short tour, we saw the company provided cafeteria, which was clean and well lit. Twenty percent of the workers had wives living on site, according to the manager, and the cafeteria transformed into a school for the children between meal times.

In response to our questions, the workers told us they had come here because the pay was so much better than the villages they had left behind. In many cases there was "no work" or just subsistence rice farming. Here they could make far more money, and send some money home. Later, I found out from one of the company managers exactly how much money these workers made, how many hours they worked and compensation for overtime. The pay, it turns out, was surprisingly high, particularly for a developing country.

Laborers at this construction site work 25 days a month, on average, and earn roughly 45,000 yuan, or $7,260 a year if they are unskilled, according to the company. However, it's important to adjust for the cheaper cost of living in China. Using a method known as purchasing power parity (PPP) estimation can help give a better sense of these numbers. That same salary would be equivalent to earning about $12,100 in the United States, using World Bank conversion factors.

Highly skilled workers, such as construction crane operators, do far better, earning up to $19,355 per year (or 120,000 yuan), while a PPP adjustment makes their annual salary in U.S. terms about $32,300. This is indeed a far cry from working in a rice paddy field, where villagers might only earn $500-$1,000 a year. Overtime is also generous: if workers work more than ten hours, they get an extra half day's payment. And working more than twelve hours earns them a whole extra day's payment.

While these wages are higher than the country average for migrant construction workers, the wage growth rate for all migrant workers has been remarkably rapid in recent years. In 2011 wages were up 21% and in more recent years annual increases have been just under 12 percent, according to China's National Bureau of Statistics. Yet even at 10 percent annual wage growth, this means wages for migrant workers are doubling every seven years.

Although we visited just one migrant worker construction site in a vast country, it is a clear example about how in general, market forces bid up wages and vastly improve working conditions, in response to rapid economic growth. For these migrant workers we met, they only saw a bright future ahead of them, and a gratefulness to be able to support loved ones back home. At times they were no doubt lonely, but no different than the American pioneers or immigrants who took similar risks for a chance at a better life for their children and grandchildren.

 

Craig Richardson is a professor of economics at Winston-Salem State University in North Carolina.  

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