Mainland China has a population of almost one billion people of which more than 400 million comprise the labor force. How to use the labor force rationally is a vital concern which has excited a great deal of interest and discussion. The planned distribution of the labor force has been discussed frequently, but never implemented systematically. In this study, we will analyze how the labor force could have been distributed efficiently under a system which though largely planned would have incorporated some market forces.
The results of our research indicate that the framework for the development and distribution of the Chinese labor force is based on central planning. In general, China possesses abundant labor but is seriously in need of high level managerial personnel and highly skilled manpower. There are two methods that can be used to solve this problem outside of the physical allocation of labor. One is to import those technical skills and the equipment necessary for practical operation. The other is to expand and cultivate at home skilled manpower and high level personnel.
Since the Cultural Revolution, labor has been subject to physical allocation. Administrative designation directs the horizontal movements of labor across different regions, sectors, industries and production centers. Wage rate policy has not been determined primarily with a view towards its effect on labor allocation. Rather, the effect on incentives and the size of the total wage bill have consistently been the most important considerations in the formulation of wage policy, since the wage system was established by the central government in 1956. For this reason, wages can perform only a very limited labor allocation function.
The major objective of Chinese labor allocation practices has been to maintain the bulk of the large labor force in rural areas to minimize its strain on urban areas. After toppling the “Gang of Four,” Deng Xiao-ping and his allies initiated a new set of policies dealing with employment and payments and rewards for industrial workers. The new employment policy is ambiguous. Two contradictory approaches are now used when recruiting labor. The first is the meritocratic approach which selects employees by examination. The second is the ascriptive approach which provides jobs for the children of employees. Jobs for employee’s children are found in two ways. One is the “ding ti” or replacement policy which guarantees a position for one child of each retiring employee. The other is to give employee’s children preferential treatment when new batches of workers are hired.
