Report No. 6 on China's Population and Labor Issues (2005): Employment and Social Security Issues in Resource-Based Cities

Author: Cai Fang, Editor-in-Chief
Publisher:
Publish Date: 2005-08-01
Features: Authoritative institutions · Brand books · New edition every year. Review annual cutting-edge information, predict the changing trends of the times! The Pipi series books are large-scale series books launched by the Social Sciences Academic Press in recent years. They consist of a series of authoritative research reports on economic and social development, analyzing and forecasting the current status and development trends of various fields in the economy and society each year. In 2005, the Social Sciences Academic Press launched nearly 30, mainly divided by color, including blue books, green books, yellow books, etc. The content covers multiple fields such as economy, society, culture, law, finance, rural development, international situation, as well as multiple industries such as tourism, real estate, and medical and health, and multiple regions such as Beijing, Shenzhen, Guangzhou, the northwest, the northeast, and the Yangtze River Delta. The authors of this series of books are mainly experts from the Chinese Academy of Social Sciences, all top experts from first-class research institutions in China. Their annual reports and views reflect the highest level of understanding and recognition of the reality and future of China and the world, and are of undeniable authority. People usually divide the resources possessed by a society into physical capital, labor, and natural resources. The role of natural resources in the economic life seems not to be a controversial issue in theory. Even those who are not familiar with economics can reach a positive conclusion based on intuition: resource-rich countries are more conducive to economic growth. However, the experience of most resource-rich developing countries has not confirmed this conclusion. In the 1950s, economists noticed that the export structure of developing countries, which was mainly based on raw materials, was not conducive to their economic growth. The discovery of the Groningen gas field in the 1970s, although it brought huge wealth to the Netherlands, also brought the famous "Dutch disease." The role of natural resources in economic growth and social welfare began to attract the attention of economists, sociologists, geographers, political scientists, and others. Since the 1990s, empirical analyses by economists of the economic growth and social welfare status of resource-rich developing countries have shown that resource-rich countries actually have lower growth rates and lower levels of social welfare. Their conclusion is pessimistic: natural resources have imposed an inexplicable curse on economic growth. Although some economists question this conclusion, their conclusion is equally pessimistic: resource-rich countries lead governments to choose bad economic systems and policies, thus creating an "indirect curse" on economic growth and social welfare. Has the negative impact of natural resources on economic growth and social welfare occurred in China? To clarify this question, we must first understand the formation background of China's traditional "catch-up strategy" system. The development strategy characterized by "priority growth of heavy industry" is not randomly determined; wherever natural resources are discovered, the central government will invest funds there. Today, most resource-based cities have a significantly higher proportion of heavy industry compared to non-resource cities. The industrial structure dominated by heavy industry has very limited capacity to absorb labor. To ensure full employment, the government will require mining enterprises (heavy industry) to hire more labor than they actually need. Under soft budget constraints, these enterprises can still survive through subsidies, but once they face market competition, they will fall into difficulties due to their lack of competitiveness. In 1998, the central government set the goal of "three years to get out of difficulties" for state-owned enterprises, an important measure being the of social burdens from state-owned enterprises, solving soft budget constraints, and establishing incentives within enterprises. The central government allowed state-owned enterprises to reorganize their internal resources according to competitive needs and independently decide on labor hiring, while the "three security lines" were used to help employees and their families who were separated to overcome difficulties. The impact of layoffs and unemployment on urban families in China, especially those in old industrial bases and areas with a high proportion of heavy industry, was significant. It is easy to imagine that resource-based cities, due to the implementation of the priority growth strategy of heavy industry, suffer from more severe underemployment, and after the mid-1990s, the prices of mineral resources and energy in China continued to decline, leading to the difficulties of numerous mining enterprises and even greater pressure to separate surplus personnel compared to non-resource cities. Another factor that must be pointed out is that non-resource cities, by developing labor-intensive industries that better match their comparative advantages, have experienced faster economic growth than resource-based cities since the reform and opening-up. When the slow growth of resource-based cities and the employment pressure overlap, their difficulties become more prominent. Another prominent feature of resource-based cities is the more severe division of administrative and economic jurisdictions: almost every resource-based city has a mining enterprise with an administrative level equivalent to that of the local government. These enterprises belong to central or provincial departments and rarely provided tax revenue to local governments under the traditional system. Today, when they face operational difficulties and need to offload surplus personnel and other social burdens, they find that local governments are unwilling to take on this heavy burden. For this reason, the reform of mining state-owned enterprises has lagged far behind that of non-resource cities. On June 1, 2000, the central government issued Document No. 11 to assist in the reform of mining enterprises: allowing "resource-depleted" mining enterprises to close down and liquidate, and writing off bad debts for these enterprises; at the same time, providing more preferential guarantees for the transferred employees of these enterprises. The costs of these two measures are mainly borne by the central government. On one hand, this accelerates the pace of reform of mining enterprises, but on the other hand, it also encourages a large number of mining enterprises to choose "resource depletion" and close down. Local governments in resource-based cities are naturally very happy to have the central government bear this burden. They not only encourage mining enterprises to declare "resource depletion" but also attribute the slowdown in economic growth and the increase in employment pressure to "resource depletion." The closure and liquidation of mining enterprises in resource-based cities are more a result of policy, but due to the reallocation of interests brought by closure and liquidation—such as a sudden increase in laid-off and unemployed workers, some laid-off workers may not receive the economic compensation and assistance promised by the government on time and in full, collective enterprise workers are often excluded from special assistance, and unemployment leads to a decline in living standards—these issues can cause public dissatisfaction. Moreover, a few insiders take advantage of the closure and liquidation to legally buy the state-owned mines and their equipment at low prices, which further exacerbates the sense of "relative deprivation" among the majority of workers, posing challenges to social stability in resource-based cities. The mining sector and mining city governments have recently been calling for "four mines to be valued more than three agricultural issues," demanding special rescue policies for mining cities, especially those entering the "depletion period." However, their suggestions to "provide money and materials" are not entirely consistent with the direction of mining system reform—establishing and improving the mineral market system. Governments at all levels have already introduced various preferential policies to support the transformation and development of resource-based cities. Against this backdrop, this year's Green Book shifts its focus to resource-based cities, analyzing major issues such as economic growth, labor market conditions, poverty occurrence, and relief, as well as exploring their unique economic structure, institutional barriers, and the effectiveness of China's labor market policies and social security system construction in recent years. We aim to clarify the problems and origins in resource-based cities and propose solutions to these issues. This book is divided into two parts, with the first part consisting of two thematic reports. The main focus is on analyzing China's population situation and labor market conditions. Thematic Report One is "Population Transition and Policy Analysis," written by Cai Fang, Zheng Zhenzhen, Zhang Chawei, Du Yang, Zhang Yi, Zhang Zhixin, Wang Dewen, Wu Yaowu, Lin Bao, Zhang Yan, Lian Pengling, Gao Wenshu, and Zhang Xuehui. The report analyzes the transformation of China's population structure and its impact on economic growth, the labor market, demand for education and health, and explores corresponding countermeasures. Thematic Report Two is "Employment Situation and Policy in 2004–2005," written by Mo Rong. The report reviews the changes in China's labor market supply and demand in 2004 and proposes the possibilities of labor market changes in 2005 and corresponding countermeasures. The second part includes nine chapters. Chapter 1, written by Hu Kui, introduces the emergence and historical evolution of resource-based cities. Chapter 2, written by Cai Fang and Wu Yaowu, analyzes the recent growth of resource-based cities. Chapter 3, written by Wu Chawei and Gao Wenshu, describes and analyzes the labor market conditions and special employment pressures in resource-based cities. Chapter 4, written by Zhang Zhixin, analyzes the unique economic structure of resource-based cities and the various problems arising from it. Chapter 5, written by Wu Chawei and Zhao Quan, analyzes the occurrence and relief of poverty in resource-based cities. Chapter 6, written by Wang Meiyan and Wu Yaowu, estimates the scale of informal employment in China using macro data and sample survey data, respectively, and compares and analyzes the informal employment conditions and issues in resource-based cities and non-resource cities. Chapter 7, written by Wang Zhiyong, analyzes the special institutional barriers in resource-based cities and explores issues such as the division of administrative and economic jurisdictions, the relationship between central and local governments, and the resulting conflicts. Chapter 8, written by Wu Yaowu, evaluates China's labor market policies in recent years and their effectiveness, especially in resource-based cities. Chapter 9, written by Xiao Jincheng, Wang Qingyun, Yuan Zhu, and others, analyzes the directions for solving employment pressure and alleviating poverty in resource-based cities from the perspectives of industrial transformation and promoting growth. This book is a series of achievements from the Key Project of the Institute of Population and Labor Economics of the Chinese Academy of Social Sciences. It has been supported by the Publishing Fund of the Research Department of the Chinese Academy of Social Sciences, the support of the Social Sciences Academic Press, and the specific assistance of the Research Office of the Institute of Population and Labor Economics. Special thanks are hereby expressed.