Introduction

The recent global economic downturn has had a significant impact on employment in many countries, and the full effect is yet to be felt, with the Organisation for Economic Co-operation and Development (OECD) expecting unemployment rates of around 10% next year. In the People's Republic of China (PRC) the economic downturn has been relatively mild: the economy is still expected to grow by at least 6% in 2009. But labor productivity growth in the PRC over the last few decades has been so significant that even such high output growth is not enough to offset the already apparent job losses.

The employment effect in the PRC may be a product of three different events¹: (i) the contractionary macroeconomic policies that were introduced by the government and the central bank in 2007 to slow growth but that are likely to have the same effect on the economy as the current crisis; (ii) the introduction of the new Labor Contract Law at the start of 2008, considerably increasing the cost of unskilled labor and prompting employers to cut their labor inputs; and (iii) the reduction in export orders due to the global financial crisis from the second half of 2008. These three events occurred sequentially and their impact on employment has been borne most heavily by rural–urban migrants, who provide much of the labor in the export and the low-cost, labor-intensive industries in the PRC. The close timing of these events will make it difficult to estimate the contribution of each factor. But it is useful to bear in mind that the PRC economic downturn of mid-2008 to early 2009 was the outcome of these combined events.

Generally speaking, the same set of people—rural–urban migrants—have been hit hardest by these three events. In 2008, around 130 million rural–urban migrants worked in the cities and accounted for one-third of the total urban labor force. These migrants are heavily involved in the export industries and in building and construction, both of which have been particularly affected by the downturn. The disproportionate burden of the adjustment on migrant workers is an important policy issue. Not only should we be concerned by their uneven share of the cost of the economic downturn but the sheer numbers of these workers suggest that if the economic crisis is not handled well the heavy job losses among migrants may affect the stability of the economy and society.

In this paper we address two issues. First, we document the extent of employment loss and its geographic location and industry distribution. Second, we determine the types of migrants that have borne the brunt of the downturn.

The Rural–Urban Migration in China and Indonesia (RUMiCI) Project, a 5-year project funded by the Australian Agency for International Development (AusAID), Australian Research Council, and Ford Foundation that began in the second half of 2007, provides a unique set of data to help in understanding these issues. As a major part of the research, we surveyed 5,000 migrant households in 15 cities. In the course of sampling, interviewing, tracking, and re-interviewing this group of migrants, we accumulated a detailed record of what has been happening.

The paper is structured as follows. The next section gives background information on the economic policy environment before and during the economic downturn. Section 3 discusses the size of the employment impact, and Section 4 examines the types of migrant workers who lost their jobs in 2008 because of the economic downturn. Conclusions are given in the last section.

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