Impact of Reforms on Wage and Employment Determination in Chinese State-owned Enterprises, 1986–91

Abstract

Chinese economic reforms since 1979 have introduced far-reaching changes in the labour market as well as in enterprise governance. In the state sector, which is at the centre of the transition to a market economy, wage determination has gradually been devolved to managers. Incentive pay and bonuses linked to enterprise performance have became widespread and their share in the wage bill has risen steadily. Managerial discretion over recruitment, promotions and also lay-offs has increased. Terminable employment contracts are replacing jobs for life. The labour force, in turn, has acquired greater freedom in choosing and changing jobs. The determination of wages and employment, although of crucial importance for the transition to a market economy, have as yet not been investigated empirically. Studies of transformation of the state sector have largely concentrated on efficiency and productivity (Chen et al., 1988; Dollar, 1990; Jefferson, Rawski and Zheng, 1992; Woo et al., 1993; Groves et al., 1994).

We would like to thank Richard Freeman and Andrew Oswald for comments and suggestions during the preparation of this chapter, which arises from the ESRC-funded project on ‘Public Finance in Transitional Economies — China and Poland’.