At the end of the 1970s, the Communist Party of China (CPC) acknowledged that planned economy had not managed to increase the Chinese standards of living. Consequently, it started to reform the economic system in order to modernize it. The labor market was also not been excluded from such reforms. They were aimed at transforming the state-distribution system into a market regulated one according to the principles of a market economy. Before the reform concerning the labor market took place in 1978, job distribution was completely determined by the Household Regulation System or hukou system. The hukou system was first introduced by Mao Zedong in 1958. Essentially, it divided the Chinese population into two categories: ''agricultural'' and ''non-agricultural'' (i.e. urbans). However, in the late 1970s, the super-production in agriculture resulted in the opening of Chinese borders to foreign enterprises, and the transition to a market economy triggered a strong need for workforce in urban China. On the contrary, the workforce was too important in the rural areas.
[...] All these simultaneous effects fuel the idea that migrants are indeed competing with the locals in the labor market. In conclusion, if the urbans have the feeling that migrants are stealing their jobs, this is not confirmed by scholars' studies. Despite an impressive migration to the Chinese cities after the hukou system and economic reforms, the majority of migrants are temporary migrants. They are allowed to stay and work in the city, but they are allocated low-paid, low- skilled jobs, and do not enjoy the State subsidies concerning housing, health care, education and food. [...]
[...] There are two ways for getting a local hukou (Fan, 2000): firstly, working for the State and being assigned a job in another city which implies that one already had an urban hukou. Or, less common, being rewarded a local urban hukou because of one's education or skills, and thus changing one's rural hukou to an urban one. Therefore, in a city, it is possible to categorise the population into three broad types: the nonmigrants or locals, the permanent migrants and the temporary migrants. [...]
[...] In fact, these two reasons rely in fine again on the resident status; the urban hukou allows them to access to these more prestigious jobs. Thanks to their high level of education and their skills, they have an easier access to the labor market. What is more, they are also the category who took the most advantage of the economic liberalisation and privatisation, as they have great skills to gain success in self-employment and amass wealth (Fan, 2000). In addition, having a urban hukou also allows one to benefit from the state subsidies related to food, pension, medical expenses, rent and home purchase. [...]
[...] Moreover, they often have to work more in terms of hours than urban workers: in average, migrant workers would work 56.6 hours per week whereas city workers would work 47.9 hours during the same period of time. Often, for the same occupation, they are paid (always according to this study in Shanghai), hourly 82 percent less than urban residents. Furthermore, they are often hired by private enterprises that, as seen before, do not usually provide medical, retirement or education benefits. [...]
[...] Thus, permanent migrants, because of their higher level of education, their urban hukou and their strong ties to the State institutions can be seen as competing with locals in the labor market. They generally have higher incomes than locals, they benefit from the medical, education, pension and housing subsidies from the State. Because of their high human capital, they are also the most competitive group in the newly liberalised market, and often run their own businesses. Moreover, they are also in high positions in SOEs, because of their strong links to the state. [...]
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