Lack Of Migrant Workers, But Not Lack Of College Students? Breaking Monopoly And Promoting Household Registration Reform

In recent years, China's low-end labor market began to appear labor shortage and wage rise phenomenon, it is interesting that even the financial crisis in 2008 seems to be difficult to interrupt this process.

Although there were tens of millions of migrant workers in late 2008 and early 2009.

Thus, the shortage of low-end labor seems to have become a norm in China's economy, and it seems to continue for quite some time.

This leads us to ponder the following question: why is China going to happen in the current stage? What will it do to China's future development? If the shortage of low labor force and the rise of wages will weaken the international competitiveness of China's export products, what is the most effective way to deal with it?

Lack of migrant workers, but not lack of college students?

The academic circles have provided various explanations for the current shortage of low labor force in China.

For example, in the past few decades, family planning policies and economic development have led to changes in fertility concepts and behaviors, as well as the improvement of education level, especially the expansion of university enrollment, which inevitably leads to a relatively small number of young people entering the labor market at this stage.

Although these explanations are reasonable, they are still incomplete.

Because they mainly consider the supply side of the labor market, but the demand side analysis of the labor market is insufficient.

A stark contrast is that while China is experiencing a shortage of migrant workers, it is very difficult for university students to get employed.

Therefore, the question needs to be asked: why labor force?

In my opinion, the most important factor that influences the economic growth and employment creation of a country or a small industry is whether the country or industry has strict industrial access control.

If the entry threshold of an industry is low, the industry will have a strong competitiveness, though this will lead to a low average profit rate in the whole industry, but the output value and employment can be maximized.

If the threshold is high, then the high profit rate associated with the industry is bound to be low production value, low employment and high wages.

In China, the high-end service sectors, such as finance, telecommunications, medical care and education, and some high-end manufacturing sectors represented by petroleum and petrochemical industries are more or less monopolized by the state-owned sector, and private enterprises are hard to enter.

If there were not strong industry entry controls, these departments could have created enough employment opportunities for university students.

On the contrary, the industries in the general manufacturing sector are much less regulated. Similar situations also appear in the urban low end service sectors.

The key to job creation is also here. Those industries that lack access to industry and control of the labour market create the most employment opportunities, and absorb a large number of surplus labor force that has not been fully employed in the rural areas.

Is Lewis turning point here?

Recently, domestic economists have been wondering whether China has reached the so-called Lewis turning point.

The concept of such a development economics means that because of the surplus labor force in agriculture, those developing countries with two yuan economic characteristics can use the same wage to absorb the surplus labor force in the agricultural sector during the take-off stage, and once the surplus labor is digested and the labor force pfer stagnation comes, wages will rise.

Some scholars believe that China's "Lewis turning point" has arrived.

However, some scholars hold different opinions on the "turning point of Lewis". The main argument is that even after deducting nearly 200 million of the migrant workers in cities, the absolute number of rural surplus labor is quite high, and many rural labor force has not been fully utilized.

In my view, the key to solve the above disputes is to have a deeper understanding of the effect of China's household registration system, and the key breakthrough in resolving the shortage of low labor is still the reform of household registration system.

Under the current household registration system, the pattern of "rural urban" migration in China is different from that in many other countries in the process of urbanization.

Therefore, we can observe the following phenomena that scholars have been debating: on the one hand, there are still many surplus labor forces in China's rural areas which have not migrated to the labor market for these reasons, but on the other hand, the supply of low-end labor in cities is becoming increasingly inadequate, and the shortage of migrant workers is also beginning to appear.

In this sense, the low labor shortage in China in recent years is not a lack of labor in absolute sense, but in essence it is a shortage of institutional labor related to household registration.

Breaking monopoly and promoting household registration reform

It is also for this reason that if we can effectively promote household registration reform to achieve more family mobility and permanent migration of rural floating population families, we will not only help solve the family and social problems caused by single and temporary migration, but also allow those left behind husbands, especially a large number of left behind wives, to come to cities and actively join the tight labor market.

Apart from the fact that family migration can increase the supply of urban labor, household registration reform can also increase labor supply from the marginal by reducing the retention wage of the labor force.

This is because household registration corresponds to public services such as subsistence allowances, children's schooling and affordable housing provided by the government.

Once the reform of household registration system is carried out, these public services will be covered to the urban floating population, which will help to reduce the retention wages of rural labor entering urban employment departments and further increase the supply of urban labor.

From a longer term perspective, through the establishment of a more stable expectation of floating population in urban settlement and development, household registration reform can also give mobile population a stronger incentive to enhance their own and future human capital through school education and on-the-job training.

If so, the reform of household registration system will not only alleviate the short term labor shortage, but also help improve labor skills in the long run and ultimately promote the upgrading of industrial structure.

What is the most lacking in China in twenty-first Century? From the perspective of high-end service and manufacturing sectors, the lack of determination to break monopoly, liberate industry entry control, and create opportunities for students to create opportunities; in the low-end manufacturing and service sectors, what is missing is not ordinary labor, but to change household registration barriers.