Status And Causes Of The Urban Residents' Labor Force Participation

China has the most abundant labor resource of the world, and adequate labor supply will be a long-term economic characteristic. But since the late 1990s of the 20th century, due to the lack of total demand of macroeconomic, and the deepening of opening up and industrial restructuring, state-owned enterprises advance its radical reform of the labor system in the face of difficulties. Millions of urban workers are laid-off and unemployment is increasingly severe. It is difficult for unemployed men to be re-employed. As a result they choose to withdraw from the labor market. Meanwhile, as the actual retirement age of workers much earlier, there has been huge decreasing of labor force participation (LFP) rate compared with that in the past.Jilin Province is located in the hinterland of old industrial base in northeast China. It has been severely affected by macroeconomic adjustment and the reform of state-owned enterprises. Because of the limited labor market capacity and the lack of demand for labor force, lots of workers are out of the labor market, and LFP rate is very low. It is quite important for the government to solve the contradiction between labor supply and demand in a proper way.Modern labor supply theory began from Robbins (1930) book. The amount of working time a single individual willing to supply is the result of the interaction of income and substitution effects. The change of working hours supply will depend on the contrary strength of substitution effect and income effect after wage changes. The study of labor supply shows rapid development thereafter and the research focus has gradually shifted from macro to micro. At the same time, new models have been introduced into this field continuously, and scholars have made a lot of academic achievements.Individual worker is the main decision-making of labor supply and the personal labor supply is the decision of use of time. When taking into account the individual's behavior, economists assume that the personal goal is to maximize effectiveness. That means assumed under certain conditions, people try their best to make themselves happy as possible as they can. So this paper begins with Utility Maximization Model. We demonstrate the condition to achieve maximum effectiveness is that the wage rate equals the marginal rate of substitution (MRS), between the choice of work and leisure, under resource-constrained conditions.Based on the Utility Maximization Model, methods of LFP rate are introduced. LFP rate measures the labor supply behaviors of individuals. There are mainly two types of models: one is linear model (mainly OLS), the other is a kind of model named non-linear binary selective regression model such as Probit Model and Logit Model. Binary selective regression models are used in the process because of their characteristic of cumulative probability distribution function more applicable to the LFP rate study.In the next part of the paper, we make regression analysis of survey data of urban population of Jilin Province in 2005, as an example. After data processing, we first make an analysis of overall LFP rate of the urban population of Jilin Province. The results of this analysis suggest that the LFP rate of Jilin urban population is lower than the national average. The LFP rate of males is higher than that of females. Based on gifts of individuals and the demographic characteristics of families, we use statistical methods to choose the seven explanatory variables, and analyze them in Probit Model and Logit Model. We found that although the effects of these factors on the LPF rate are very notable, there is quite different extent of their impact in different age and gender groups.Due to estimation results, we analyze the reasons of the low LFP rate of Jilin Province. One of the reasons is that the macro-economic structure adjustment and reform of state-owned enterprises cause a large number of laid-off and unemployed populations. But the more important reason is that most of those laid-off and unemployed workers are aged and with a slight overall low quality. Those characteristics make them passive in the labor market. If these people are long-term unemployed, they will lose confidence to looking for work, and then withdraw from the labor market, as so-called "discouraged workers". Meanwhile, the expectations of the ones who aim to enter labor market will be reduced because of quit of huge quantity of labor force. During this vicious cycle, the long-term result will be a lower level of LFP rate, the labor market lacks vigor, lots of human resource is idle, and some kinds of social problems may come out.To improve this situation, we suggest improving the quality of workers and providing more job opportunities. The former one is considered from the perspective of individual workers. Under the guidance of the government, workers have the chance to be conducted pragmatic, effective reemployment training and supplemented with corresponding changes in the ideological education on employment. The purpose to do so is to improve the ability of workers to adapt to the changes in supply and demand in the labor market, thereby enhancing their competitiveness, and their confidence of re-entering the labor market will be restored.We also notice that government is playing a key role in the operation of the labor market. Hence, if we want to raise LFP rate, the government must guide effectively, expand the channels of employment, and do its best to improve employment labor market environment. To be detailed, with the methods of new jobs creation, encouraging laborers entrepreneurship and issue some preferential policies to encourage enterprises to absorb laid-off and unemployed persons, we can achieve the aims to expand labor market capacity, improve the expectations of those who are out of labor market, and finally increase the LFP rate.