Resource Allocation and the Formation of the Lower Class in China

For the purpose of providing a panoramic view of the poor in China, I am going to translate a section from the book titled Social Stratification in China Today.  The section is titled Resource Allocation and the Formation of the Lower Class in China.

Based upon the current conditions, the bottom tier of our society is formed by the following three groups:

(1)  Poor rural peasants.  Since the 1980's, under the double stimulation from the rural economic reforms and the rising prices for secondary agricultural crops, the income and the standard living for rural peasants rose rapidly.  At the time, even those living in the cities felt they could not keep up.  Within the cities, the enterprises were still severely restricted by the old economic systems.  Therefore, the newly available capital flowed towards the villages which had been liberated first under the economic reform.  This led to a prosperous period in the rural villages.

This temporary period of prosperity led to the illusion that there was a genuine breakthrough in the rural villages, and some scholars characterized this as a Chinese development model that was still oriented towards the rural society.

Yet, the good things did not last.  In the mid-1980's, the full potential of the rural economic reforms had been released already, and the income growth of the peasants began to slow down.  In the mid-1990's, the rural enterprises began to see the end approaching.  With the continued tumbling down of prices for secondary agricultural crops, the vulnerability of the peasants began to show.  

According to the experts, during the late 1990's, the price of food went down by more than 30%.  This meant that for peasants who get most of their income from farming, real income has been falling.

On one hand, the income of the peasants is falling.  On the other hand, the income of the city dwellers is rising.  The result is a growing gap between urban and rural incomes.  In 1989, the ratio of urban-rural income was 2.4:1.  In 1983, the ratio shrank to 1.7:1 in an obviously significant way.  But in 1997, it grew back to 2.5:1.  In 2000, it even went up to 2.79:1, which was a historical high.  

From the viewpoint of financial assets, at the end of 1999, the rural peasants account for 1/3 of the savings at 1,000 billion RMB nationwide, whereas the percentage of peasants in China is 65%.

The problem with the rural peasants is even more serious than the poverty implied in the above figures.  The more important point is that as long as the rural peasants are structurally tied to the "earth", there is no bright prospect that can be foreseen.  

A basic fact of the matter is that the income of rural peasants seems no longer connected to the increased or steady production levels of agricultural products.  Over the past years, even when there is a bumper crop harvest, the income of the peasants did not rise, and it in fact went down.  Now that China is entering the World Trade Organization, and since most of the secondary agricultural crops in China have higher prices than in the world market, it is impossible to increase the income of peasant by articificially propping up the prices of secondary agricultural crops.

The problem is quite clear.  In an industrialized and modernized era, the "earth" can only yield a limited amount of resources and wealth, and its role in the entire economy will become less and less over time.  In western societies, this developmental stage was accompanied by large numbers of rural laborers migrating into the cities so that fewer people remained with the "earth".  In our country, during this developmental stage, vast numbers of rural residents continue to be bound to the "earth."  Almost one billion rural inhabitants continue to live on the steadily declining resources and wealth based on the "earth", so it is only inevitable that the rural peasants who rely on farming for a living should now become part of the bottom tier of our society.

In the rural villages today, the most pressing problem are those poor people who cannot cope with even meeting their basic needs.  According to the white paper on <<Developing support for the poor in Chinese rural villages>> issued by the information department of the Ministry of State, about 300 million rural residents still have problems with respect to basic food and shelter at the end of 2000.  This is about 3% of the total rural population.  Considering health and medical care as an example, a recent survey showed that 70% of rural peasants said that medical costs are rising too fast and 20% said that they can no longer afford to get medical care.  More sick people cannot afford to see doctors, buy medicines or stay in hospitals.  From 1985 to 1993, the percentage of peasants who cannot afford to get medical treatment went from 4% to 7% and the percentage who cannot afford to stay in hospitals even though they needed to went from 13.4% to 24.5%.  In the poorer mountainous areas, the incidence of people who cannot afford to get medical treatment rises to 72% and the incidence of people who cannot afford to stay in hospitals is 89%.

(2)  Rural laborers who migrate to work in the cities.  The definition of the bottom tier of society is not only determined by economic conditions, but it also a social phenomenon.  The migrant laborers are a typical lower-class group that is simultaneously determined by economic and social conditions.  From the early 1990's, the surplus labor force in the rural villages began to migrate into the cities.  As of now, more than 100 million have moved in this direction.

From the viewpoint of the whole society, rural migrant laborers who numbered more than 100 million is an identifiable and sizeable social group with unique characteristics.  From one point of view, these rural migrant laborers serve the important function of increasing the income of rural inhabitants when they send their earnings home, but there is also the important function of increasing the quality of rural labor.  Research has shown that rural youth laborers believe that working in the cities allows them to expand their worldviews and increase their knowledge.  From another point of view, due to the symbiotic relationship between the urban and rural sectors, many of these people may be living and working in the city, but they are still not part of the urban society in terms of the way that the system works.

From the viewpoint of mobility, when the first wave of labor migration occurred in the early 1990's when many peasants went into the cities, but most of them were engaged in informal jobs such as garbage picking or more marginal types of occupation doing what the urban residents were reluctant to do themselves.  At the time, they were like "transient visitors" to the cities.  More than a decade later, many of these "transient visitors" have settled down in the cities that do not belong to them.  In certain industries such as construction, they have form the main body of the frontline workers.  Those who had informal jobs have settled in the cities with their families.  Yet, the rigid hukou registration system has continued to keep them outside of the system of the city in which they live and work.  Within this city, they are undoubtedly lower-class people.

Some of these people have gone through the experience of being collected and returned home.  Supposedly, according to the 1982 <<Urban mendicant collection and return rules>> issued by the Ministry of State, the main purpose of the government program was to assist, educate and place the mendicants.  In recent years, the policy has become a way for certain departments to use against rural migrant workers, and even to extort bribes.

In the work area, their basic rights are also not always insured as it should be.  Here are the major issues.  First, the rural migrant laborers usually do those things that they city dwellers do not want to do.  The work environment is poor and the wages are low.  Within the past 10 years, the nominal wage for rural migrant laborers has not risen significantly, but the real wage has in fact been falling.  In 2000, there was a case in which a worker collapsed from overworking in a factory in Weizhou (Guangdong province).  The worker was putting in 500 hours a month.  According to information, this glove factory demanded workers to put in extra hours over the long term, and each worker had to work more than 500 hours per month on the average, with wages as low as 300 RMB per month.  Second, their basic human rights are not guaranteed.  Third, they are often owed back wages.

(3)  Urban poor people consisting mainly of dismissed workers.  During the 1990's, the problem of dismissed workers became increasingly severe.  In the cities, losing a job meant that the basic source of income has been cut off.  Thus, over the past few years, there is a new class of poor people in our cities centered around those who were dismissed from their jobs.  This is a hitherto unobserved phenomenon.

Compared to the rural peasants, this group has some special characteristics.  First, the rural peasants still have a piece of land.  Even if they lack monetary income, they can still grow food to feed themselves.  The city dwellers do not have any sucht piece of land.  When their income is cut off, they cannot even feed themselves.  A 1999 survey of 1,000 dismissed workers showed that their average income was only 61.15% of what they used to get, and the hardship cases lost even more than that.  Secondly, poverty is common enough in the environment in which rural peasants find themselves, so that there are fewer indications of a rich-poor gap; in the cities, there are strong signs of inequality between rich and poor, and this strongly affects the poor groups.  Thirdly, the cost of living is higher in the cities and fairly inelastic.  In the early and mid-1990's, prices and living expenses rose rapidly.  Although prices were relatively stable towards the end of the 1990's, there are now things that used to be covered by society but will have to paid out of pocket -- housing, children's educational expenses, some medical expenses, retirement funds, etc.  Most of the dismissed workers are between 35 to 45 years old, with parents and children to provide for.  Their wages were their principal source of income.  When they are dismissed, the entire family is in a state of poverty.  Fourthly, at a time when the work units still have certain special welfare benefits, the loss of the job brought about the loss of all sorts of other benefits.

The title of this section is "Resource Allocation and the Formation of the Lower Class in China."  The reference to resource concentration and allocation refer to the reforms in the economic structure of the country, which led to the development of new and competitive sectors as well as to the demise of traditional and inefficient sectors.  Since all these developments occurred within a very short time frame of less than twenty years, this has resulted in the dislocation of large classes of the population from the old economy which has not yet found their place in the new economy.

In the case of the poor rural peasants, the fundamental reality is that there is only that much one hectare of land can yield in terms of economic, and there is no way for agriculture to match the growth rate of the industrial and modernized economy.  The rural residents must move outside of agricultural production in order to improve their incomes.

In the case of the rural laborers who migrate to work in the cities, this calls for a more humane hukou system that will fully incorporate them into the cities in which they already live and work.  The existing system is irrational and discriminatory.

In the case of the dismissed urban workers, this is a much bigger problem.  The reason that their jobs were lost was because they worked for highly inefficient, old economy state enterprises which could no longer compete against the higly efficient, new economy private firms.  Their personal characteristics are usually middle-aged, middle-school education and their work experiences were in low-technical unskilled areas.  There will be fewer and fewer jobs that have requirements for these combinations.  Instead, the job demand in the future will be for better educated and highly skilled people.  Such growing pains can also be seen in the United States and Hong Kong among people who have lost manufacturing jobs to outsourcing.

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