IEMS Newsletter - May 2015 - page 1

Inequality in wages and employment
outcomes has grown significantly in urban
China, coinciding with the timing of urban
enterprise reforms and labor market reforms
in the 1990’s.
Be f o r e t h e s e r e f o rms , wa g e a nd
employment inequality in urban China was
low. Virtually all urban enterprises were
state- or collective-owned and provided the
bulk of urban employment. Moreover, the
labor market was centrally regulated, making
it difficult to fire unproductive workers.
Bu t w i t h t he on s e t o f t he u r ban
reforms, inequality, and gender inequality,
increased. Figure 1 shows the increase
in the gap between the male and female
urban employment rate, defined as the
employment share of male and female
working-age populations. The increase in
this gender inequality begins around 1997
with a conscious privatization strategy called
“Holding on to the Large, Letting go of the
Small” (
Zhuada, fangxiao
). At the same
time, labor markets were allowed to become
more decentralized. A 1997 initiative called
“xia gang” freed SOEs from providing to
employees in-kind benefits, such as housing,
medical care, and pensions, and firms were
given more autonomy and discretion in
setting earnings and bonuses, recruitment,
layoffs, and promotions.
Is this growing gender inequality a
problem and, if so, how should policies
be targeted? This question is important for
policymakers, as many different processes
may be at work, and different processes
suggest different policy responses. Certain
processes of inequality, such as unfair gender
discrimination in the labor force, clearly hurt
society, and should be remedied with policy
tools, while other mechanisms, such as
individuals setting up unequal compensation
structures to maximize productivity, do
not merit interference. Unfortunately, the
existing literature on China’s growing urban
gender inequality is inconclusive, finding
only that “unobservable skills” are playing
a larger role in both overall male wage
inequality and gender inequality. In addition,
the wider literature on the evolution of
gender inequality in transition economies is
inconclusive; in some transition economies,
gender gaps in employment increased, while
in others, they decreased.
This brief sheds light on the topic by
examining the role of urban enterprise
reforms that induced mass privatization
Chinese Workers Performing
Quality Assurance by Robert
Scoble, CC BY 2.0,
The Employment Gender
Gap in Urban China:
Why Women Benefited Less from
China’s Privatization Reforms
Christina Jenq, HKUST Institute for Emerging Market Studies
Female-biased privatization
during the 1990's era urban
reforms played a significant role
in increasing the gender gap in
employment in urban China.
Consistent with the theory
of ownership-specific human
capital, older cohorts and the
less skilled were more affected
by privatization.
Policymakers concerned about
the welfare of laid-off workers
should focus programs on those
with relatively more ownership-
specific and sector-specific
human capital, i.e. less-educated
and older workers.
Policymakers concerned about
gender inequality should focus
their attention on why state-
protected sectors hire relatively
more males.
1 2,3,4
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