Chinese migrant workers willing to accept lower wages

A short section of an article in the latest issue of the Far Eastern Economic Review which contains the most interesting new information from a study by Stanford University and the Chinese Academy of Sciences (CAS):

‘The survey data show that the initial impact of the crisis was much worse than was previously imagined. Of the 265 million rural-dwellers with off-farm employment, 45 million, or 17%, either lost their jobs or delayed their move out of agriculture between September 2008 and April 2009. The impact was felt more deeply in southern provinces than northern, which was to be expected given the concentration of exporters in the south. Younger workers were hit harder than older workers, perhaps because the experience of older workers made them more valuable and factory owners were more reluctant to let them go. Less educated workers were more likely to lose their jobs than more educated; those educated to primary school or lower were most likely to face unemployment. The impact of the crisis was neutral between men and women, which suggested that the trend toward a higher share of female workers in the off-farm labor force will not be interrupted.

But the results also show that the ability of China’s migrant workers to adapt to the crisis was much better than was previously imagined. By April 2009, the results suggested, 25 million of those rural workers who lost their off-farm jobs had found new employment. By August, that number had increased to 32 million, leaving just 13 million unemployed, or 4.9% of the total off-farm rural labor force.

The results also indicated that the reason for the success of migrant workers in finding new employment was a willingness to accept lower wages. In response to the massive increase in surplus labor, off-farm wages adjusted downwards by about 10%. For China as a whole, that meant a fall from about 850 yuan ($125) per month average off-farm wages in 2008 to about 765 yuan per month in 2009, with a steeper fall from a lower base in the south than in the north. It was not clear whether falling wages resulted from falling hours, falling hourly rates or some combination of the two. But what is clear is that the market for China’s off-farm rural labor is flexible, and wages have adjusted to accommodate the shock from the sharp decline in demand.’

Why no minimum wage? (Ha-ha).