Moving Beyond Lewis: Employment and Wage Trends in China’s High- and Low-Skilled Industries and the Emergence of an Era of Polarization

One of the defining features of China’s economy over the two decades between 1995 and 2015 was the persistent rise of wages for workers and professionals in nearly every segment of the economy—with wage rates for labor-intensive jobs in manufacturing, construction, and the informal service sector rising the fastest. Recently, however, the economic environment in China has begun to change, including changes in both employment and wages. We identify recent employment/wage trends throughout China’s economy and postulate the sources of these trends as well as possible future consequences if they continue. We use official, nationally aggregated data to examine employment and wages in multiple sectors and industries. Our findings indicate that China may have entered a new phase of economic development in the mid-2010s. According to the data, in recent years, wage growth has begun to polarize: Rising for professionals employed in formal skill-intensive industries; and falling for workers in the informal labor-intensive service sector. We attribute this increase in skill-intensive wages to an increase in demand for skill-intensive employment, due to the emergence of a large middle class in China, for whom the demand for high technology, finance, banking, health, and higher education industries is increasing while, at least in the recent short term, the supply of experienced, high-skilled professionals has not kept up. The employment/wage trend in the informal (low-wage) service sector, however, is following a different pattern. While there is a rising demand for services in China’s economy, the growth, due to a number of factors (e.g., large shares of GDP targeted by policymakers to investment; high rates of savings by consumers), is relatively slow. In contrast, due to a number of economic forces, including globalization and automation, the supply of labor into the service sector of the informal economy is being fueled by the flow of labor out of manufacturing and construction (two industries that that have experienced employment declines since 2013). These supply and demand trends, in turn, are leading to the fall in the growth rate of wages in the informal service sector. We conclude by discussing the possible longer-term consequences of these emerging polarization trends based on an examination of recent experience with wage polarization occurring in both middle- and high-income countries, as well as its consequences. We also present policy recommendations for greater investment in education and human capital, as well as for the development of a more comprehensive set of social safety nets for different segments of China’s population.

Who Is in Charge? The Provision of Informal Personal Resources at the Street Level

Street-level bureaucrats (SLBs) nowadays provide services under conditions of increased demand for public services coupled with scarcer financial resources. The literature that focuses on how workers adapt to this situation mainly examines their provision of formal resources as part of their job. What researchers have not systematically examined is the delivery of informal personal resources (IFRs) by street-level workers to clients. Understanding the provision of IFRs is particularly important when “no one is fully in charge” of public services. Drawing on 214 in-depth qualitative interviews with SLBs who provide education, health, and welfare services in the public sector in Israel, we found a remarkable range of IFRs they provided to clients. We also found that four main factors influencing the provision of IFRs: lack of formal resources; professional commitment; managerial encouragement; and a work environment whose values combine old and new approaches to public service. The findings contribute to the public administration literature by exposing how public service function in a somewhat vague reality, and they contribute to the SLB literature by highlighting the unrecognized component of informal service provision.

Spinners or sitters? Regimes of social reproduction and urban Chinese workers’ employment choices

Despite China being the world’s factory, its labor market is now primarily service-based with a high level of informality. When formal manufacturing and informal service sectors co-exist, how do workers make their choices? While existing literature focuses on rural migrant workers’ experience in the Chinese labor system, this study extends the analytical scope to low-skill urban workers. Drawing on archival, interview, and ethnographic data in a large industrial city in central China, I compare urban women’s different trajectories in textile manufacturing and informal domestic service. Building on labor regime studies and Social Reproduction Theory, I develop a framework called “regimes of social reproduction” to explain workers’ job choices. I argue that China’s post-socialist industrial restructuring has given rise to a public–private hybrid regime of social reproduction, which keeps workers’ pension and healthcare schemes in the public domain and pushes childcare, elderly care, and domestic work to the private sphere and then marketizes them. For urban workers, when choosing between formal manufacturing and informal service, it is their position within the regime of social reproduction that plays a decisive role. Their position is assessed along the following two dimensions: (1) the degree of a worker’s dependency on the employment-based welfare provisions and (2) the degree of demand for reproductive labor in a worker’s family. Challenging the conventional view that formal manufacturing jobs are more desirable than informal service jobs, I conclude that under the current regime of social reproduction, the booming informal service market may provide some best earning opportunities for low-skilled urban workers. However, the same regime has also set significant limits on such opportunities as these urbanites’ availability to work is highly contingent on (lack of) demand for reproductive labor from their own family.

Informal Emptying Business in Mandalay: Its Reasons and Financial Impacts

Globally, 2.8 billion people use on-site sanitation facilities, which need regular emptying of accumulated fecal sludge. Illegal dumping from informal emptying businesses, one of the major challenges in environmental management, is widely observed. Considering Mandalay, Myanmar, this study aimed to determine why informal emptying businesses are selected and estimate the lost revenue for a formal emptying service provider (FP) due to the informal businesses. We interviewed 400 households on their recognition and experiences regarding emptying services and willingness-to-pay for improved service. Revenue loss was estimated by comparing the present and theoretical maximum revenues. Results showed that 91.0% of households recognized FP only. Among 134 emptying-experienced households, 32.8%, 59.7%, and 4.5% chose FP with legal contact, FP with illegal contact, and informal service providers, respectively. The service fees from FP with illegal contact did not become revenue for FP; this was a major informal emptying business in the city. Differently from previous studies, the major illegal dumping was done by FP in this area. A great financial loss was estimated that FP lost 76.5% of the theoretical maximum revenue due to informal business. Logistic regression analysis indicated people’s intention to shorten the waiting time through illegal contact, even by paying a higher fee. As emptying services are typically required immediately after fecal sludge is over-accumulated, shorter waiting times and faster contact methods were the reasons why the informal business was selected. Less bureaucratic and more customer friendly system could reduce revenue loss, charge more, and increase profits.

Why do informal service enterprises remain informal? A RIDIT approach

Purpose The purpose of this paper is to identify reasons as to why firms operate informally, and to explore the rationalisation of not moving towards formalisation. Design/methodology/approach Building on empirical data collected through interviews with the entrepreneurs of the informal service enterprises of Delhi and peripheral areas, this paper presents the results of the survey conducted in 2017. By using the analytical tool developed by I. Bross, the authors have identified the most significant contributing factors to informality. Findings In the research, the authors establish that competition and lack of awareness are the most dominant reasons due to which informal firms are hesitant in moving towards formalisation. For successful transition towards formalisation, a “new pact” between the workers, enterprises and governments needs to be developed, based on capacity building, productivity gains, enabling business environment, empowerment and entitlements to social and economic rights. Research limitations/implications The research is limited only to informal service enterprises located in Delhi, the national capital of India, and the peripheral areas. Practical implications By identifying the most dominant factors, focussed steps can be taken to reduce the size of the informal sector. Originality/value The informal service enterprises are not a widely explored community by researchers and policy makers. This sector can employ more people with less investment, and hence requires intensive study. The use of RIDIT approach to rank the identified factors due to which the firms do not move towards formalisation is the novelty of this work.

The service sector: migration, technology and productivity

PurposeThe purpose of this paper is to study the characteristics of the workers in the informal economy and explore the reasons for workers migrating from rural to urban area. The authors also explore and enumerate various reasons why the migrants choose to work informally and study whether internal migrants treat this sector as temporary or transitory before moving to the formal sector. The authors reconnoitre the issues in coverage of factors in unregistered service, this research is carried out at a smaller scale of operations of the service enterprises having a minimum of three (or more) employees, which poses significant issues in the enumeration. This work further emphasises on the reasons why people migrate and choose the informal sector (IS) and to estimate the contribution of technology towards productivity of this sector.Design/methodology/approachBuilding on empirical data collected through interviews with the migrants, who are now part of the informal service enterprises of Delhi and peripheral areas, this paper presents the results of a survey conducted in 2017. This research is based on appropriate scale driven by the instrument of choice by the sampling of units. Data were collected by conducting field survey using structured questionnaire. By performing the estimation at the unit rather than the industry level, the authors reduce difficulties of mis-measured output and inputs, thus, potentially obtaining a more accurate estimate of technologies contributions towards the firm productivity.FindingsThe small service enterprises are making poorer value addition towards measured productivity due to the factors such as lack of equipment or technical know-how. The authors find that marginalisation thesis holds true only partially and the rest are in this sector by choice, considering it as an opportunity. Maximum number of entrants had been attracted by opportunities in this sector itself; actual and potential mobility from the informality towards formalisation is quite low; education is one of the important determinants for entrepreneurs shifting from informality towards formalisation.Research limitations/implicationsThe research is limited only to informal service enterprises located in Delhi, the national capital of India and the peripheral areas.Practical implicationsBy identifying the factors, proper policy measures can be designed which will be in a focused direction to reduce the size of the IS and to improve the working condition of the migrants who are part of this sector. The estimation is at the unit level using primary data.Originality/valueThe estimation is at the unit level using primary data, the research contributes to the literature on informal service sector, and this sector needs more intensive large-scale studies in order to design policies which can result in betterment of the society as a whole, benefiting the segment that needs immediate attention from government and society as well.

Managing informal service organizations at the base of the pyramid (BoP)

PurposeThis paper aims to explore and learn about managerial practices of informal services at the base of the pyramid (BoP).Design/methodology/approachThe study reports findings of an empirical research conducted in 16 cities in Mexico during a two-year period. Managerial practices in 327 micro-businesses were identified and analyzed after conducting direct observation and personal interviews with owners, employees and customers of these BoP informal service businesses.FindingsThe paper shows that managerial practices of BoP informal service micro-businesses are developed through a dynamic, integrated network of owner, employees and customers who integrate scarce resources building win-win-win relationships to satisfy their basic daily needs.Practical implicationsThe creation and management of a BoP informal service business is mainly a matter of satisfying basic needs, aiming to positively transform a community by improving well-being. This paper provides insights to understand those relationships and interactions among the main actors involved, highlighting the need to identify and integrate the BoP service management cycle to better address their needs.Originality/valueThis paper proposes a conceptual service management framework for informal micro-businesses at the BoP integrating the owners, employees and customers’ perspectives. Three corresponding cycles are identified and discussed, which are useful to elicit relevant characteristics of key roles, activities, interactions and relationships taking place in informal services.

Working with the Informal Service Chain as a Locally Appropriate Strategy for Sustainable Modernization of Municipal Solid Waste Management Systems in Lower-Middle Income Cities: Lessons from Accra, Ghana

Twenty years of formal private sector participation in solid waste management in Ghana has failed to deliver an increase in collection coverage and recycling rates. This article shares lessons and experiences from Accra, Ghana, a middle-income city where researchers and municipal solid waste managers have collaborated to modernize the municipal solid waste management system by working together to develop a locally appropriate response to the informal waste service sector. Stakeholders have used inclusive decision-making and participatory research methods to bring formal service providers to work in partnership with their informal counterparts to improve collection and recycling. The Wasteaware benchmark indicator framework has been used to assess and compare the improvements in the physical and governance aspects of the municipal solid waste management system, supplemented by statistical analysis of responses to a survey on the socio-economic contribution of the informal service providers in the city. Within two years of their inclusion, the number of informal service providers has increased by 71 percent, from 350 to 600, creating new livelihoods and contributing to poverty reduction. The informal service providers have been able to increase collection coverage from 75% to 90%, waste capture from 53% to 90%, and recycling rates from 5% to 18%, saving the municipality US$5,460,000.00 in annual operational costs. The results have influenced the decision-makers to move towards structural integration of the informal service providers into the formal waste service system. The shift towards practical, locally responsive interventions in Accra provides a positive example of sustainable waste management modernization, and key lessons for cities in similar economies.