In order to assess the employment implications of demographic changes in contemporary China, one has to be aware of the historical background, from the establishment of the PPR until today. The first labour system in China, which was set up in the 1950s and was based on the Soviet model, determined the employment market in China up until 1978, when Deng Xiaoping launched the reforms and Open Door Policy. 1. 1949-1978The labour system was characterised first and foremost as state director of labour. Its labour’s mobility was strictly monitored and prohibited, and in 1958 in an attempt to narrow the gap between the rural and the urban areas, the Hukou system was initiated. (Implemented in rural areas as early as 1955)It was an egalitarian system, everyone was paid the same, and there was a lack of incentives. This type of labour system was very expensive, due to the existence of many supervisors and its inefficiency, i.e. overstaffing and underemployment. On the other hand - it has avoided open unemployment and serious urbanization problems, and it has provided employees with security.Demographic changes prior to 1978 were mainly due to the exceptional rate of growth of the Chinese population. There had been hardly any inter migration, (with the exception of the Culture Revolution, when millions were sent to the countryside), and consequently employment issues were subject to the overall ideology and to the natural demographic growth of the population. Although neither in the urban nor in the rural sector, no evidence to unemployment was found, it is likely that in the countryside the phenomenon of underemployment was well known at times. 2. 1978-2008In 1978, the Chinese government has begun a process of reform designed to improve the mobility, flexibility, incentives and efficiency of labour. There is a very considerable urban-rural divide in China: a great disparity in average living standards as between workers and peasants. This is true not only of measured house hold income but also of such social provision as education, health, and social security. Rural people, therefore, have a strong incentive to move to the urban areas. In the pre-reform such movement was strictly controlled and restricted (Hukou). One of the consequences of the economic reforms was that the degree of control over the movement of rural labour was weakened. Nevertheless, rural-urban migration remains restricted by comparison with most other developing countries. Since the early 1980s, over 100 million Chinese farmers have left their native villages to work as nomadic labourers and traders in the cities. They form the largest peacetime movement of people in history. Officials estimate that an additional 130 million rural people lack sufficient land or employment to guarantee their source of income, non official estimations point at 200 million .The majority of migrants are from poor rural areas of the interior provinces, which are predominantly agricultural and have low levels of economic diversification. In the urban sector the employment situation is even more problematical. Whether intentionally to conceal or because its own data are inadequate, official figures on the number without work are enormously elusive and contradictory. The Chinese officials use a few terms to describe the phenomenon of loosing jobs - “unemployed” (shiye), “laid off” (xiagang), and “ceasing to receive wages but holding onto one’s post” (tingxin liuzhi), or those in so called “long holidays” (fang changjia). As a result, “jobless” (meiyou gongzuo) is been officially broken up into numerous definitions, which only few of them being regarded as “registered unemployed”, in a way that makes the overall estimation rather impossible. Some say that 20 million had been “laid off” until 1997, some say 40 million (half of the former SOEs employees) etc’. Since the 1990s, the Chinese government has carried out an unprecedented reform of SOEs, involving the discharge of millions of workers. As of mid 2001, after 6-7 years of massive bloodletting from the rolls of SOEs, one outcome is apparent. No one, including the central government, knows how many once state workers have been removed from their posts. China’s reform of the SOEs has been characterised by the Chinese saying “Draining the water before the tunnel is ready”. In other words, the unemployment insurance system is not adequate. It is not clear whether the massive migration to the cities has contributed to the unemployment in the urban sector.It is becoming clear that migration establishes linkages between rural and urban areas, allowing return flow of people, skills, capital, commodities, and information. Since 1995, approximately one third of the “floating migrant population” from China’s interior provinces have been returning from cities to resettle in their native homes. Return migration is influenced by a range of factors, such as urban employment, illness and industrial accidents, obligations to family in the village, as well as marriage, pregnancy, deaths and other lifecycle events. In Conclusion, in the Chinese context, the most important issue is the employment market. Wages differentiation is a big problem and there is still a strong notion of egalitarian system (in which everyone gets the same). Lack of adequate security / insurance system, especially in the rural sector amplifies the problem. more details at:www.helios-developmets.comsoucing-from-china.blogspot.comAbout AuthorSource: ArticleTrader.com