52The Impact of the Global Financial Crisis on Off

PolicyResearchWorkingPaper5439TheImpactoftheGlobalFinancialCrisisonOff-farmEmploymentandEarningsinRuralChinaJikunHuangHuayongZhiZhurongHuangScottRozelleJohnGilesTheWorldBankDevelopmentResearchGroupHumanDevelopmentandPublicServicesTeamOctober2010WPS5439PublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedPublicDisclosureAuthorizedProducedbytheResearchSupportTeamAbstractThePolicyResearchWorkingPaperSeriesdisseminatesthefindingsofworkinprogresstoencouragetheexchangeofideasaboutdevelopmentissues.Anobjectiveoftheseriesistogetthefindingsoutquickly,evenifthepresentationsarelessthanfullypolished.Thepaperscarrythenamesoftheauthorsandshouldbecitedaccordingly.Thefindings,interpretations,andconclusionsexpressedinthispaperareentirelythoseoftheauthors.TheydonotnecessarilyrepresenttheviewsoftheInternationalBankforReconstructionandDevelopment/WorldBankanditsaffiliatedorganizations,orthoseoftheExecutiveDirectorsoftheWorldBankorthegovernmentstheyrepresent.PolicyResearchWorkingPaper5439Thispaperexaminestheeffectofthefinancialcrisisonoff-farmemploymentofChina’srurallaborforce.UsinganationalrepresentativedatasetcollectedfromacrossChina,thepaperfindsthattherewasasubstantialimpact.ByApril2009thereductioninoff-farmemploymentasaresultofthecriseswas6.8percentoftherurallaborforce.Monthlyearningsalsodeclined.Thispaper—aproductoftheHumanDevelopmentandPublicServicesTeam,DevelopmentResearchGroup—ispartofalargereffortinthedepartmenttostudytheeffectsofcrisisrelatedeconomicshocksonlabormarketsandhouseh[e-mail],whileitisestimatedthat49millionwerelaid-offbetweenOctober2008andApril2009,halfofthemwerere-hiredinoff-farmworkbyApril2009.ByAugust2009,lessthan2percentoftherurallaborforcewasunemployedduetothecrisis.Therobustrecoveryappearstohavehelpedavoidinstability.TheImpactoftheGlobalFinancialCrisisonOff-farmEmploymentandEarningsinRuralChinaJikunHuang,HuayongZhiandZhurongHuangCenterforChineseAgriculturalPolicy,ChineseAcademyofSciencesScottRozelleStanfordUniversityandKatholicUniversityofLeuven(adjunct)JohnGilesWorldBankKeywords:globalfinancialcrisis,off-farmemployment,earning,rural,China,AsiaAcknowledgment:TheauthorsacknowledgethefinancialsupportofChineseAcademyofSciences(KSCX1-YW-09-04,KACX1-YW-0906)andWorldBank(KnowledgeforChangeProgram,RF-P116739-RESE-TF094568).Theresultspresentedinthispaperareentirelythoseoftheauthors.Theydonotnecessarilyrepresenttheviewsoftheiraffiliatedorganizationsormembercountries.2TheImpactofFinancialCrisisonOff-farmEmploymentandEarningsinRuralChina1.INTRODUCTIONThereisawellknownsayingChina,“jihanqidaoxin.”AroughEnglishtranslationis:whenpeasantsarehungry,theyrebel.Hence,itisunsurprisingthatwhentheglobalfinancialcrisishaltedproductioninfactoriesacrossChina,leadingtolay-offsoflargesegmentsoftheruralmigrantlaborforce,Beijing’sleaderswerequicktorecognizethatthismightnotonlybeaneconomiccrisisbutasocialoneaswell.OfChina’smorethan500million-strongrurallaborforce,265millionpeoplewereestimatedtohaveoff-farmemploymentinthemid-2000s(Zhangetal.,2008).Ofthese,morethanhalfhadlefttheirhometowntolaborintheworkplacesthatsprawlacrossChina’seasterncoastandlargemunicipalities(Kongetal.,2009).WhatwouldhappeniftoomanyofChina’sruralresidentslosttheirjobs?Anecdotalreportsonlyheightenedconcerns.Forexample,inOctober2008,thenight-flightofonetextilefactoryownerinShaoxing,acity100milesfromShanghai,left4,000workersunemployedand$200millioninbillsunpaid(Xiao,2008).Hisformeremployees,findingthefactorygatesboltedandtheirerstwhileemployernowhereinsight,eruptedinprotest.Inotherplaces,laid-offmigrantworkershadnooptionbuttoreturntotheirhometowns(Johnsonetal.,2009).Somedecidedtoreturntotheirvillagesandtobeginfarmingagain.However,therewerecasesreportedinthemediawhereindividualsreturnedtotheirhomevillagesonlytocreatetensionandconflictwiththetenantsthathadbeenfarmingthelandwhilethemigrantshadbeenlivingandworkinginsomefarawaycity(Yang,2008).3Unfortunately,thereislittlesystematicinformationavailabletoChina’stopleadersandeconomicplanners.China’spolicymakersrequiredataonthenumberoflaid-offand/orunemployedruralworkers,andinformationabouttheconsequencesofjoblossforworkersinordertogaugetheseriousnessofthecrisis.Theestimatesthatdoexistconcerningtheimpactofthecrisisonrurallaborrangewidely.Oneanalystprojectedthat12millionworkerswouldbelaid-off(Shengetal.,2009)andanotherplacedtheestimateat20million(Chen,2009).Thenatureofthereporting,thedefinitionsof“impacts”andsourcesofthedata,however,werenotalwaysclear.Somewhatsurprisinglygiventheimportanceofthequestion,therehavenotbeenmanyindependentattemptsbyresearcherstoestimatetheimpactofthefinancialcrisisonChina’srurallaborforce.Theexistingresearchtodateinthisareafacesdataissuesorothershortcomings.Forexample,Kongetal.(2009)usedfactorydatatoestimatelayoffs.Relyingonfactorydataalone,however,failstoaccountforlabormarketflexibility:workersmayhavelosttheirjobs,butfoundotherselsewhere