System, Human Capital And China's Rural Surplus Labor Transfer

It happended some new events in China’s recent economic development, such as the contradiction between farmer and cultivated land, the implementation of the Innovation-oriented Country Strategy, the implementation of New rural construction strategy, new rural reform, the shortage of peasant-worker and urbanization rate exceed more than half, etc. It also produced a lot of new problems, such as "Three Rural Issues", sustainable development of agriculture, manufacturing crisis, increasing income gap between city and rural, the decrease of rural human capital stock and so on. These phenomena and problems are close related to the transfer of rural surplus labor. But the dual economic theory doesn’t tell us all the answers of these questions. China’s transfer process along with the process of switching to a market economy, The institution limitation and human capital limitation made the process of transfer more complicated both in the sustainable development of the rural areas and in the transfer process of rural surplus labor. This paper, from the two aspects, the institution and human capital, discuss the transfer of rural surplus labor process, and the author will analyse the new phenomena and problems appeared in the transfer process.Structuralism and neoclassicism has been controversial on research about rural surplus labor transfer in developing countries. Structuralism focus on those widely existing characteristics such as rigidity, surplus, scarcity and high elasticity of supply etc.It pays more attention to non-progressive, non-continuous and disequilibrium, and highlights the influence of macrostructure. Individual or family was often used as analysis unit in neoclassicism; they focus on the concepts of wage difference between urban and rural areas, expected earning, rational choice, utility maximization and the flow of production factors, etc. It emphasizes economic equilibrium through marginal adjustment and market repair. The theory mainly highlights influence of microeconomic choice. China’s economy has non-walrasian equilibrium characteristics. Structuralism is more suitable for China’s economic reality.The debate of China’s rural surplus labor transfer research are focus on the definition and the number of rural surplus labor, the cause and influence factors, urbanization lag or over-urbanization, Lewis turning point, local transfer or migration transfer, etc. The theoretical framework all seems to lean to the structuralism. But this paper argues that China’s surplus rural labor transfer has its particularity, the transfer process mixed with the economical transformation process, so the institution factors are very important, and cannot be stripping out of the analysis framework.By use of various statistical data and survey data, this paper objectively described the transfer current situation of rural surplus labor in China, such as the total number of rural surplus labor, gender and age distribution, vocational distribution, education and training situation, income level, employment information acquisition modes, input and output region distribution, living situation, consumption level, rights and interests protection situation, etc.. Then, the auther compared these characteristic with the other countries and regions’, and find some special rules in the transfer of rural surplus labor in China. They are the great income gap between city and rural, the big stock of rural surplus labor, the rapid transfer speed; inconsistency of industrial transfer and regional transfer; extremely low transfer quality; income can’t afford of city consumption; very low human capital endowment of the rural surplus labor; small permanent migration scale, etc.. The dule economic theory cannot explain all these special rules. The reason possibly is that the theory missed some special important variables. The two important missing variable factors are institution and human capital which can explain the unique characteristics in the process of the Chinese transfer to great extent.In this paper, the discussion of institution is divided into two parts, mandatory institution obstacles and induced institutional innovation. Mandatory institution which influence China’s rural surplus labor transfer includes National Development Strategies (heavy industry preferred strategy, city priority strategy, production priority strategy, Innovation-oriented Country Strategy), land institutions, household registration institutions, employment institutions, social security institutions and housing security institutions, etc.. Heavy industry preferred strategy has caused the demand of rural surplus labor decrease. City priority strategy has caused the backward of rural development. Production priority strategy has caused shortage in urban infrastructure investment. Peasants must have been left in rural areas so as to reduce the consumption demand. Innovation-oriented Country Strategy ignored both the economic status of the rural surplus labor is the result of equilibrium and the industry adjustment must conform to the factor endowment. The people’s commune institution seriously destructed the agricultural production and led to anti-urbanization. The household contract responsibility system made the land fragmentized. It against the modern production elements invested into agricultural. The household registration system brought about the inconsistency of industrial transfer and regional transfer. It sacrificed transfer quality for transfer quantity breakthrough. Employment institution led to the low employment quality of rural surplus labor, they were obliged to employ in informal sector. It also led to the lack of peasant-workers’labor market. Social security institution led to lack of labor protection and the welfare subvention when rural surplus labor entered into the city. Peasant-workers’life was embarrassed without the shield of social safety net. In the face of these institution limits, Chinese rural surplus labor made many institution innovations instead. Those innovations included the township enterprise institution, the household contract responsibility institution and other land institution innovation,"Peasant workers", bartered between each other,"recessive allowances","Village in city" dwelling style, etc..When the institutional factor and the structure factors predominated in the Wage determination of rural surplus labor force, human capital’s influencd is limited. The rural surplus labor force confronted a "S type of human capital investment curve" Human capital investment incentives are not enough in labor-intensive industries and the field of informal department’s employment. Now, China has the conditions to apply to neoclassical development economics, with the emergence of the shortage of "peasant-workers", wage inflation and the arrival of the first "Lewis turning point" These phenomena means that the human capital investment has become the main factor of wage determination.Gap between urban and rural human capital investment means that the rural surplus labor been in competition conditions adverse again.Introducing the analysis of institutions and human capital, this paper summarized the model of Chinese rural surplus labor transfer as "dual market and dual labor force". As a result of "amphibious transfer","recessive allowances","village in city" dwelling style and other reasons, the rural surplus labor force has a cost advantage after they swarm into the secondary market. This is the reason why the urban residents are not willing to enter into the secondary market. Instead, urban residents enjoy institution and human capital superiority when they enter into the primary labor market. They are facing with a weak competition aroused by the few high-skilled rural surplus labor. Mandatory institution obstacles and the path deadlock caused by induced institutional change are all restricting the flow between two markets. With the rise of rural surplus labor wage and the reducing of "peasant-workers","recessive allowances","Village in the City", or the improving of human capital endowment, the possibility of free flow across markets will be enhanced in the near future."the First Lewis turning point" created the conditions for the flow across the market,it also drive the finally discussion of this paper on how to create "the unitary labor market".Not only do we need to overcome the compulsory institution obstacles with the aid of continuous reform on the household registration institution, land institution and social security institution;but aslo need we to overcome path deadlock caused by the induced institution change, to improve the quality of transfer, these strategies include human capital investment, the upgrading of the industrial structure etc. Only in these ways, will we meet the arrival of "the unitary labor market" in the future. In order to stimulate the advanced production elements investing into agriculture, we need to carry out the agriculture industrialization, agricultural technological innovation and the New Rural Construction. Thus, we can truly eliminate the gap between urban and rural areas, let labor free flow between each industrial sectors without any restrictions, finally realize the target of high quality transfer of the rural surplus labor.The innovation of this paper is that it established a "dual market and dual Labour" transfer model. Then it discussed the induced institution changes happened in the transfer of rural surplus labor force. It aslo made a deep discussion on the possibility and conditions of "Unitary Labour market" and analysised the different function that human capital made in every stage of transfer process.