Cost Estimation and Cost Sharing Mechanism for Citizenization of Rural Migrant Workers

  • Jingjing Shan
Chapter
Part of the Current Chinese Economic Report Series book series (CCERS)

Abstract

Advancing the citizenization of migrant workers in a methodic and systematic manner is a major task during urbanization in China. The primary challenge in this process seemingly lies in slow institutional reforms but essentially lies in adjustments to the pattern of interests behind these reforms and the resulting social costs. What exactly are the social costs required in the citizenization of migrant workers? Are they affordable? How can we create a reasonable and workable cost sharing mechanism? These are the questions that must be answered during the ongoing urbanization of China.

Keywords

Migrant Worker Government Spending Unemployment Insurance Affordable Housing Compulsory Education 
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Advancing the citizenization of migrant workers in a methodic and systematic manner is a major task during urbanization in China. The primary challenge in this process seemingly lies in slow institutional reforms but essentially lies in adjustments to the pattern of interests behind these reforms and the resulting social costs. What exactly are the social costs required in the citizenization of migrant workers? Are they affordable? How can we create a reasonable and workable cost sharing mechanism? These are the questions that must be answered during the ongoing urbanization of China.

Citizenization of Migrant Workers: The Concept

In China, migrant workers result from an urban-rural dual structure and constitute a special group during socioeconomic transformation. They mainly refer to workers who work in non-agricultural sectors but still carry the symbol of farmer status.1

The citizenization of migrant workers refers to the process whereby, after making occupational changes, migrant workers secure social status and rights equivalent to those of residents with urban hukous and gain equal access to public resources and benefits provided by governments, thereby fully integrating into political, economic, social and cultural activities in cities.

Costs involved in the citizenization of migrant workers mainly refer to financial costs required for migrant workers’ settling down in towns or cities and receiving corresponding benefits and equal access to public services. If categorized by source, these costs can generally be categorized into public costs (i.e., government costs), personal costs and corporate costs. Public costs mainly include additional fiscal spending required for governments’ providing new registered city residents registered city residents with public services, social security and new (or expanded) infrastructures. Personal costs mainly refer to living and development costs that migrant workers and their families need to pay for settling down in towns or cities. So far as companies are concerned, they must provide employees with necessary working conditions, workplace safety, as well as wages and benefits under China’s labor contract law, while paying social insurance premiums for them as required by law. In other words, companies need to pay the aforementioned expenses for all employees, whether they possess urban or rural hukou. During the citizenization of migrant workers, therefore, corporate costs mainly include additional corporate expenses required for providing migrant workers with housing and professional skill training. In reality, however, such expenses are very low because most companies provide migrant workers with housing by using existing workplaces, disused factory buildings or makeshift houses, according to a survey. And professional skill training is mostly paid for by allocating education/training expenses before taxes are paid,2 signing labor agreements with trainees, and agreeing upon service periods. Accordingly, such corporate expenses are largely part of production costs rather than the costs involved in the citizenization of migrant workers. Since companies have low additional expenses in the citizenization of migrant workers, this paper focus discussion on government and personal costs in this process.

Current Methods for Estimating Costs Involved in the Citizenization of Migrant Workers and Deficiencies

There are now only a few studies by Chinese scholars on costs involved in the citizenization of migrant workers, and quantitative analyses of these costs are even fewer due to a lack of workable measurement methods and required data. Existing studies roughly fall under three categories:

  • First, studies focused on personal costs involved in the citizenization of migrant workers. Niu Wenyuan and Liu Yijun (2009),3 for example, focused their study on personal living and development costs in the citizenization of migrant workers. Chen Guanggui (2004)4 argued that the costs of citizenization of farmers in China include public and personal costs, but he only estimated personal costs in the citizenization of migrant workers, including urban living, housing, education/training and self-support costs.

  • Second, studies focused on public (or government) costs involved in the citizenization of migrant workers. Diao Chengtai and Huang Jinghong (2005),5 Zhen Yanlin et al. (2005)6 and Gao Hongyan (2010),7 for example, focused their studies on additional fiscal spending required for building infrastructures and creating jobs in the citizenization of farmers. A research team of the former MOC (2006),8 the DRC Research Team (2011)9 and Shen Bing (2012)10 focused their studies on public costs involved in the citizenization of migrant workers, including the costs of infrastructure, public services, social security, affordable housing, urban management, and education provided to children who also migrate with their parents, which are required for receiving citizenized migrant workers (i.e., new registered city residents registered city residents). The city of Chongqing (2011)11 paid attention not only to the costs of migrant workers’ entry into towns or cities, but to the fact that their exit from the countryside also requires public costs, before estimating the overall cost that a government needs to pay in these two respects during the citizenization of migrant workers.

  • Third, studies on social costs (including public and personal costs) involved in the citizenization of migrant workers. The Division of Sustainable Development Strategy (DSDS), the Chinese Academy of Sciences (CAS) (2005),12 for example, researched personal and public costs involved in the citizenization of migrant workers. Zhang Guosheng (2008),13 and Cao Bing and Guo Yuhui (2012)14 estimated public and personal costs involved in the citizenization of migrant workers. Zhou Xiaogang (2010),15 China Development Research Foundation (CDRF) (2010),16 Zhou Xiaojin (2011)17 and Zhao Xiangdong (2012)18 also measured, in different dimensions, public and private costs involved in the citizenization of migrant workers.

Current studies on the costs of the citizenization of migrant workers have produced certain fruits, but still with much room for improvement, according to existing literature. First, the costs of the citizenization of migrant workers remain conceptually unclear, and estimation results vary widely (they range from 25,000 to 1,197,000 yuan per capita on average) and are not widely recognized due to the absence of a generally accepted cost make-up and estimation method. Second, public service costs are computed with missing or repeatedly computed items, are not systematic and lack politically valuable information. Third, the cost measurement of urban infrastructure construction, maintenance and management does not take into account the law of decreasing marginal costs, resulting in cost overestimation. Fourth, the citizenization of migrant workers is accompanied by the migration of rural surplus population, which leads to an increase in urban public spending and a decrease in rural public spending corresponding to these migrants (e.g., migrant workers may exit the NREI and NRCMCS once they become covered by pension and medical insurances for urban employees). Nonetheless, existing studies mostly take into account only the increase in public costs while ignoring the decrease, so they overestimate the overall fiscal spending to certain extents.

Cost Estimation for the Citizenization of Migrant Workers

The term “migrant workers” has broad and narrow senses. In the narrow sense, migrant workers mainly refer to rural people of working age who leave both the farmland and their hometowns, move between regions, and work in non-agricultural sectors in towns or cities, that is, non-local migrant workers. In the broad sense, migrant workers include rural people of working age who leave the farmland but work in non-agricultural sectors in their hometowns, that is, local migrant workers, in addition to non-local ones. In 2012, there were 263 million migrant workers across China, including 163 million non-local ones, or 62.2 % of the total number, and nearly 100 million local ones, or 37.8 % of the total number, according to the Statistical Bulletin of the People’s Republic of China on the 2008 National Economic and Social Development published by the NBS. So far as age is concerned, most Chinese migrant workers are young and middle-aged people and were 36 years old on average in 2011; local migrant workers are, on average, 12 years older than non-local ones,19 from which we can estimate that the latter are about 32 years old on average. Since there are great differences in citizenization costs and other dimensions among migrant workers, this Report only discusses such costs of representative migrant workers and assumes that:
  1. 1.

    The research subject of this Report is non-local migrant workers aged 32 on average;

     
  2. 2.

    They retire at age 55, on average, as legally required in China and have a life expectancy equal to that of all Chinese people, or 75 years old;

     
  3. 3.

    In 2011, married female migrants with rural hukou in the childbearing age range each had 1.71 children on average (this can be viewed as the average number of children of a couple of migrant workers in their lifetime), and married people represented 58.2 % of all non-local migrant workers, according to the Dynamic Floating-population Monitoring and Survey 2011 data released by the former NPFPC.20 Children represent the vast majority of people who migrate with non-local migrant workers, while parents of these workers generally do not migrate with them, or do it on a temporary basis, according to a survey. Assume that all children migrate in the citizenization of migrant workers, then we know that the number of family members who migrate with each non-local migrant worker is 0.50 in this process;

     
  4. 4.

    Since the rural land transfer system has yet to be established in China, this Report does not take into account expenses paid by rural migrant workers regarding such things as land exchange or exit. Instead, it only considers changes in public costs caused by their gaining access to public services in the same manner as native urban residents do after they finish rural-urban migration and citizenization.

     

To simply and intuitively reflect the overall cost of the citizenization of migrant workers, this Report employs the SOTP (sum of the parts) method – the costs in the citizenization of migrant workers are classified into public and personal costs, which are estimated separately before being summed up.

Public Costs

Public costs refer to additional fiscal spending required to build and maintain urban infrastructures and to provide public services so as to receive new registered city residents registered city residents, mainly including expenses concerning urban infrastructure construction/maintenance, public services& management, social security, compulsory education for migrant children, and affordable housing.

Urban Infrastructure Construction/Maintenance Costs

Urban infrastructure construction/maintenance costs in the citizenization of migrant workers mainly refer to additional expenses required to build and maintain municipal infrastructures and public facilities concerning water supply/drainage, power/gas supply, roads and public sanitation so as to receive new registered city residents registered city residents. Given the public nature of these infrastructures and facilities as well as the law of decreasing marginal costs relevant to the average construction/maintenance costs per capita – after towns or cities develop to certain levels, expenses required to build and maintain municipal infrastructures/facilities for each new citizen will be obviously lower than the aforementioned average – the average urban infrastructure construction/maintenance costs per capita in the citizenization of migrant workers equal the current average urban infrastructure construction/maintenance costs per capita multiplied by the marginal coefficient of urban infrastructure construction/maintenance costs. In this Report, the marginal coefficient equals the weighted sum of the ratios of marginal costs to average costs concerning the construction/maintenance of municipal infrastructures/facilities such as road, water supply/drainage and transport systems for new registered city residents registered city residents across China in 2005–2011. Regarding the citizenization of migrant workers, the annual average urban infrastructure construction/maintenance costs per capita in eastern, western and central regions, and across China, are 716, 547, 603 and 677 yuan respectively, according to the relevant calculations (see Table 5.1).
Table 5.1

Urban infrastructure construction/maintenance costs in citizenization of migrant workers

Item

Region

East

West

Central

Nationwide

Urban infrastructure construction/maintenance costs (in billion yuan)

463.40507

152.47161

196.64618

812.52286

Average urban infrastructure construction/maintenance costs per capita (in yuan/year)

716

547

603

677

Source: calculations are based on relevant data from China Urban Construction Statistical Yearbook 2012 and China Statistics Yearbook 2012

Notes: The “Urban Infrastructure Construction/Maintenance Costs” in this table only include fiscal spending on municipal infrastructure construction and maintenance, and do not include non-governmental funds; To facilitate computation, all marginal coefficients in this table are the average marginal coefficients of urban infrastructure construction/maintenance costs in China

Public Service & Management Costs

Public service & management costs in the citizenization of migrant workers refer to additional spending required to provide public services and carry out daily urban management so as to receive new registered city residents registered city residents, mainly including expenses concerning general public services, education, culture/sports, medical & health care, sanitation and social security. Among them, costs concerning social security and compulsory education for children of migrant workers will be separately discussed later as an outstanding issue in the citizenization of Chinese migrant workers, and this section will focus on discussing and estimating the other public service & management costs concerning general public services, culture/sports, medical & health care and other respects in the citizenization of migrant workers. It is worth emphasizing that in the citizenization of migrant workers, the influx of rural migrant workers into towns and cities requires a corresponding increase in urban public service & management costs, but at the same time, there will also be a corresponding decrease in rural public service & management costs. So far as overall fiscal spending is concerned, therefore, public service & management costs incurred in the citizenization of migrant workers mainly exhibit themselves as the difference between the aforementioned increase and decrease, rather than only the increase. The annual average public service & management costs per capita in the citizenization of migrant workers in China as well as east, central and west regions are 806, 1,623, 505 and 465 yuan respectively, according to relevant estimates (see Table 5.2).
Table 5.2

Public service & management costs involved in the citizenization of migrant workers

Item

Region

Nationwide

East

Central

West

General public service expense (in yuan/person year)

Urban

1,064

1,367

849

964

Rural

616

508

565

716

Difference

448

859

284

248

Culture/sports expenses (in yuan/person year)

Urban

180

284

110

161

Rural

104

83

75

122

Difference

76

201

35

39

Medical & health care expenses (in yuan/person year)a

Urban

671

860

558

658

Rural

388

297

373

480

Difference

283

563

185

178

Average public service & mgmt. costs per Capita (in yuan/year)

806

1,623

505

465

Source: calculations are based on data from China Urban Construction Statistical Yearbook 2012 and China Statistics Yearbook 2012

aAverage medical & health care expenses per capita include government spending on urban and rural medical & health care services/management, medical subsidies, population & family planning services, medical relief and other public services

Social Security Costs

Social security costs involved in the citizenization of migrant workers fall under two headings – personal costs (they will be discussed later) and public costs, that is, fiscal spending required to let new registered city residents gain equal access to social security, such as the basic pension, medical and unemployment insurances, in towns or cities. In reality, governments mainly pay costs concerning post-retirement, medical and unemployment support, minimal living allowances and social relief in the citizenization of migrant workers. Since estimates regarding medical & health care costs already include government spending on medical subsidies and relief, population and family planning services, and others, this section will only discuss government costs concerning post-retirement and unemployment support, minimum living allowances, social relief and others in the citizenization of migrant workers.

So far as retirement or pension insurance is concerned, employees and their employers should share premiums, and governments need not pay any additional cost, according to relevant national regulations. Nonetheless, estimates are made for China’s current pension system according to the fact that Chinese employees retire at age 55 and have a life expectancy of 70 years, and that they and their employers are required to pay monetary amounts equivalent to 8 % and 20 % of their wages respectively. The pension fund may become insufficient and need government subsidies if employees and/or their employers make underpayments, or if pensions and/or life expectancy increase during socioeconomic development. In addition, governments tend to provide certain amounts of subsidy so as to increase residential support and reduce, for employees or companies faced with financial difficulties, the pressure to pay relevant expenses. The government of Ningbo City, for example, pays each person covered by social insurance who lives in a city-administered area an annual allowance ranging from 60 to 100 yuan since 2010. The government of Shaanxi Province provides companies in the public sanitation sector with subsidies equal to the full amounts of corporate payments made for employee insurances. It also provides their employees with allowances equal to 12 % of a particular amount, which is now 60 % of the average wage of employees in this province in the previous year. It has done this from 2013 onward. Since local governments have different subsidy standards and comprehensive data is unavailable, this Report relies mainly on one of the results of a survey by the DRC Research Team (2011) in cities such as Chongqing, Jiaxing, Wuhan and Zhengzhou, that is, average government spending on pension insurance for each new citizen equals 35,927 yuan.

By the end of 2011, there were already 326 million Chinese people covered by the NREI. Governments now provide NREI subsidies in two categories – the basic pension for people eligible for such subsidies, which is now 55 yuan/person/month, and a minimum allowance of 30 yuan/person/year. The first is solely paid by the central government for central and western regions, and jointly paid by the central and local governments on a 50:50 basis for eastern regions. The second category is solely paid by local government for farmers. Assume that, after they become registered city residents, all migrant workers will exit the NREI and, instead, become covered by basic pension insurance for urban employees, then government spending on post-retirement support for each new citizen is 25,577 yuan after fiscal spending concerning the NREI is deducted (see Table 5.3).
Table 5.3

Social security costs involved in the citizenization of migrant workers

Region

Item

Basic pension insurancea (in yuan)

Unemployment insuranceb (in yuan/person/year)

Minimum living allowancec (in yuan/person/year)

Widowed or single old peopled (in yuan/person/year)

Average social security per Capita (in yuan/person)

West

25,466

464

86

–

39,832

East

25,739

712

77

14

45,547

Central

25,552

249

70

 8

34,362

National average

25,577

540

76

11

41,356

Source: calculations are based on relevant statistics from China Urban Construction Statistical Yearbook 2012, China Statistics Yearbook 2012, and a survey by the DRC Research Team (Civilianizing the Rural migrant workers, China Development Press, 2011)

Notes:

aPension insurance cost equals the sum of additional fiscal spending on basic pension insurance for urban employees after the citizenization of migrant workers and reduced fiscal spending on the NREI after migrant workers exit this system. Among them, the additional spending figures are derived mainly from research results from the DRC Research Center (2011), with Jiaxing, Chongqing, Wuhan and Zhengzhou representing eastern, western and central cities respectively. People may receive money from the NREI system only after they pay premiums for at least 15 years and are of age 60 or older, according to relevant national regulations. In this table, the reduced fiscal spending after migrant workers exit the NREI system is computed with the assumptions that they each pay premiums for 15 years and receive basic post-retirement support for 15 (i.e., 75–60) years

bUnemployment insurance cost includes government spending on basic living support for the unemployed and assistance in their reemployment; the unemployment support cost concerning new registered city residents is computed according to an annual average urban registered unemployment rate of 4.1 % (this was the rate across China in 2011) and the average unemployment insurance expenses per capita in each region in 2011, plus the assumptions that the average number of years of receiving unemployment insurance benefits is 1 year, the percentage of government funding per capita is 60 %, and all new registered city residents will work for 23 (i.e., 55–32) years on average

cMinimum living allowances are computed on the basis of 43 (i.e., 75–32) years

dCosts concerning support for widowed or single old people are computed on the basis of 10 (i.e., 75–65) years

So far as unemployment insurance is concerned, money now comes mainly from premiums paid by individuals and companies as well as government subsidies. There remain difficulties in collecting such insurance funds since a lot of companies, especially the ones with higher profitability, wrongly believe that the unemployment insurance system is robbing the rich to feed the poor. Government funds represent about 60 % of unemployment allowances that are already paid in China, according to a study.21 Assume that, after migrant workers become registered city residents, this percentage remains, and both the registered unemployment rate and the average unemployment insurance expenses per capita are the same as in 2011, then the annual average government spending per capita computed according to the total number of new registered city residents is about 540 yuan (See Table 5.3).

Given the unavailability of statistics about government spending on minimum urban living allowances and on support for widowed or single old people who are childless or have long been left uncared by their children (“widowed or single old people” for short), this Report also takes research results from the DRC Research Team (2011). The average social security costs involved in the citizenization of migrant workers in eastern, central and western regions as well as across China are 45,547, 34,362, 39,832 and 41,356 yuan respectively, according to relevant estimates (see Table 5.3).

Compulsory Education Costs Concerning Children Who Migrate with Their Parents

Compulsory education costs concerning children who migrate with their parents in the citizenization of migrant workers result from two main reasons. First, since there are inequalities in compulsory education expenses between urban and rural areas in China, a corresponding increase in government spending on compulsory education is required after children of migrant workers move into towns or cities and receive education there. Second, since existing urban education resources can only receive a limited number of students, spending on new elementary and high schools is required as a growing number of migrant children move into cities.

With regard to compulsory education expenses, the ratio of average education expenses per capita in urban areas to those in rural areas is about 3.1:1; the urban-rural differences in the annual average education expenses per capita during elementary and high schools are 1,809.6 and 1,016.1 yuan respectively, according to studies by scholars such as Luo Zhiqian on inequalities in compulsory education between urban and rural areas in China.22 Regarding non-local migrant workers, the ratio of the number of children less than 15 years old to that of these workers was about 49.8:100 in 2011, according to dynamic monitoring data from the former NPFPC and the NBS. Assume that with the citizenization of migrant workers, all such children finish transformation with them and receive compulsory education in towns or cities, then we know that government spending on compulsory education for these children is about 7,602 yuan/person (based on the price level in 2011).

With regard to school building costs, education resources in the host place will doubtlessly become insufficient as a large number of migrant workers move into cities and become registered city residents. There remain 61.0255 million left-behind children, including 29.48 million who are in the age range for compulsory education, in rural areas across China, according to the Research Report on the Status of Left-behind and Rural-urban Migrant Children in China published by the All-China Women’s Federation (ACWF) in May 2013. Assume that all children of existing migrant workers in the age range for compulsory education can receive it at school,23 but after the aforementioned left-behind children finish transformation, it would be necessary to build new schools for these new urban children, and each of these schools is able to receive the same number of children every year. In the city of Wuhan, for example, building an elementary school that could receive 840 students would require 25 million yuan in 2008, and this number would become higher in the case of a high school, according to multiple studies.24 In the city of Ningbo, building an elementary or junior high school that could receive about 1,000 students would require over 56.00 million yuan in 2009.25 In the city of Mianyang, building a school that could receive 900 students would require 70 million yuan or, if 30 million worth of expenses for disposing of original assets was deducted, 40 million yuan in 2012. By comparison, building school infrastructures in Beijing often requires over 100 million yuan after 2000. Beijing No. 12 High School spent 170 million yuan on new school buildings; Beijing Huiwen High School spent 120 million yuan on expansion; Beijing No. 80 High School spent 320 million yuan on its new campus in Wangjing, for example. Given the unavailability of comprehensive data, we take school building expenses in the cities of Ningbo, Wuhan and Mianyang to represent expenses for building an elementary or high school in eastern, central and western towns or cities respectively, the current number of left-behind children in the age range for compulsory education to represent the total number of children to be received by relevant new schools, and the distribution of migrant workers by receiving region (65.4 %, 17.6 % and 16.7 % in eastern, central and western regions respectively) presented in the Migrant Workers Monitoring Survey Report 2011 published by the NBS to represent that of children who migrate with them. For these children to receive compulsory education, the average school building expenses per capita across China and in eastern, central and western regions are 6,578, 7,464, 4,782 and 5,014 yuan respectively, according to our calculations.

We can then work out the average compulsory education cost per child – 14,180, 15,066, 12,384, and 12,616 yuan across China and in eastern, central and western regions respectively – according to the aforementioned government spending on providing compulsory education for children who migrate with migrant workers and on building new schools (see Table 5.4).
Table 5.4

Compulsory education costs for children who migrate with migrant workers

Item

Region

Nationwide

East

Central

West

Average compulsory education expenses (in yuan/person)a

7,602

Required number of new schoolsb

29,480

19,309

5,218

4,953

Average school building cost (in yuan/person)c

6,578

7,464

4,782

5,014

Average total compulsory education cost (in yuan/person)d

14,180

15,066

12,384

12,616

Source: calculations are based on relevant statistics from the Migrant Workers Monitoring Survey Report 2011 (the NBS, 2012), the 2012 Report on China’s Migration Population Development (the DFPSM, China Population Publishing House, 2012), the Research Report on the Status of Left-behind and Rural-urban Migrant Children in China (the ACWF, 2013), China Statistics Yearbook 2012 and China City Statistical Yearbook 2012

Notes:

aThe numbers were computed according to the total number of registered city residents and were converted into prices equivalent to those in 2011 according to comparable price levels

bThe required numbers of new schools were computed according to the number of left-behind children in the age range for compulsory education in 2011 (i.e., the number of children who will also need to migrate in the citizenization of migrant workers), the distribution of migrant workers by receiving region in 2011 (assume that children who migrate with them have the same distribution) and the assumption that each school has 1,000 students on average

c,dThe numbers were computed according to the total number of registered city residents and were converted into prices equivalent to those in 2011 according to comparable price levels

Costs of Providing Affordable Housing

Costs of providing affordable housing to migrants mainly include additional government spending required to include new registered city residents into the urban housing assistance system. Such costs mainly include the costs of building affordable housing and government allowances provided to migrant workers included in the low-rent housing system.

Affordable housing refers to special housing that governments build for low- and middle-income households and that has characteristics of social security, mainly including low-rent housing, public rental housing, economical rental housing, affordable housing and price-controlled housing. Such housing tends to be built, rebuilt, bought or, for a long period of time, rented by governments. Specifically, low-rent housing, public rental housing and economical rental housing are typically funded by governments or other organizations, receive policy support, or are bought back or rented by governments. Chinese cities now differ from each other in terms of required areas of affordable housing, but typically control the apartment areas of low-rent housing, for example, to make sure that they are within 50 m2, or 15–20 m2 per capita on average. This Report assumes that governments build affordable housing for 20 % of migrant workers with an average building area of 20 m2 per capita, then we can work out that the average building costs per capita in China and in eastern, central and western towns/cities are 9,491, 10,714, 7,892 and 8,685 yuan respectively (see Table 5.5).
Table 5.5

Affordable housing costs involved in the citizenization of migrant workers

Item

Region

Nationwide

East

Central

West

Affordable housing building cost (in yuan/person)a

9,491

10,714

7,892

8,685

Low-rent housing allowance (in yuan/person)b

2,520

4,500

1,620

1,620

Average total housing assistance cost (in yuan/person)c

12,011

15,214

9,512

10,305

Source: calculations are based on relevant data from China Statistics Yearbook 2012 and local affordable housing policies

Notes:

aThe average building costs per capita of affordable housing were computed according to the assumption that governments build affordable housing for 20 % of migrant workers with an average building area of 20 m2 per capita; regional house building costs in 2011 were referred to for the affordable housing building costs, which were computed on the basis of the total number of registered city residents

bThe average low-rent housing allowance per capita was computed on the basis of the total number of registered city residents, with the assumption that governments grant such allowances to 15 % of migrant workers with an average allowance-covered area of 20 m2 per capita, and that rent allowances are granted for 5 years at the average level of cities in each region

cThe average housing assistance cost was computed according to the total number of registered city residents and relevant prices in 2011

Low-rent housing is affordable housing that governments provide to low-income households, which benefit from receiving rent allowances if they already rent housing, or simply being provided with low-rent housing. Low-rent housing is available more often by means of rent allowances than of such housing itself or rent reduction/exemption. Our survey shows that the policy of “Cover all the eligible ones” is adopted for low-rent housing in all regions across China. Specifically, low-rent housing allowances range from 20 to 30 yuan/person/month/m2 in eastern cities, and 8–10 yuan/person/month/m2 in central or western cities. Since low-income people represent a large share of the group of migrant workers and generally have no housing, this Report assumes that governments grant low-rent housing allowances to 15 % of migrant workers with an average allowance-covered area of 20 m2 per capita for 5 years on average. We then know that the average low-rent housing allowances for migrant workers across China and in eastern, central and western regions are 2,520, 4,500, 1,620 and 1,620 yuan/person respectively (see Table 5.5).

By summing up the aforementioned affordable housing building and allowance costs, we can work out that the average housing assistance costs in the citizenization of migrant workers across China and in eastern, central and western regions are 12,011, 15,214, 9,512 and 10,305 yuan/person respectively (see Table 5.5).

Personal Costs

In addition to high government spending, migrant workers need to bear high personal costs during citizenization, mainly including living, housing and self-support costs in the host towns or cities.

Living Costs

Living costs incurred in the citizenization of migrant workers mainly refer to daily consumer spending paid by these workers and their families in urban life with respect to clothing, food, housing, travel, education and entertainment. Since housing costs were already estimated in the cost analysis of the citizenization of migrant workers, the annual average consumer spending paid by urban residents in all regions in 2011 minus housing costs (excluding water/power/fuel and property management-relevant expenses) is taken in this section as the annual average living costs in the citizenization of migrant workers, which equal 14,710, 16,981, 12,139 and 12,351 yuan/person/year across China and in eastern, central and western regions respectively, according to relevant estimates (see Table 5.6).
Table 5.6

Living costs involved in the citizenization of migrant workersa

Region

Item

Consumer spending (in yuan/person/year)

Housing costsb (in yuan/person/year)

Average living costs (in yuan/person/year)

East

17,568

586

16,981

Central

12,531

392

12,139

West

12,672

321

12,351

Nationwide

15,161

451

14,710

Source: calculations are based on relevant data from China Statistics Yearbook 2012

Notes:

aAll living costs were computed according to the average consumer spending and prices in 2011

bHousing costs exclude water/power/fuel expenses and property management-relevant expenses

Housing Costs

Housing is one of the most difficult issues that cause the highest costs in the citizenization of migrant workers. Although some of these workers will be included into the affordable housing system of governments, the vast majority still need to solve this issue for themselves and their families in the host towns or cities. In this Report, the unit prices of urban housing in all regions multiplied by the average housing areas per capita of local residents are taken as the housing costs of migrant workers. These costs are almost equivalent to the costs paid by migrant workers to buy local affordable housing,26 or the minimum costs for them to reach the average housing levels of native urban residents after they become registered city residents. Housing expenses actually paid by migrant workers tend to be higher than these costs, of course. Personal housing costs incurred in the citizenization of migrant workers across China and in eastern, central and western regions are about 101,000, 126,000, 84,000 and 91,000 yuan respectively, according to relevant estimates (see Table 5.7).
Table 5.7

Personal housing costs incurred in the citizenization of migrant workers

Region

Item

Housing price (in yuan/m2)

Average usable floor area (in m2)

Housing cost (in yuan/person)

East

2,678

35.3

126,013

Central

1,973

31.8

83,634

West

2,171

31.5

91,159

Nationwide

2,373

31.9

100,906

Source: calculations are based on relevant data from China Statistics Yearbook 2012 and China Urban Construction Statistical Yearbook 2012

Note: to compute real-world housing costs, usable floor areas were already converted into building areas with the equation of building area = usable floor area × 1.333

Self-Support Costs

Employers are required to buy five insurances – basic pension insurance, basic medical insurance, unemployment insurance, workplace injury insurance and maternity insurance – for their employees. Premiums for the first three are shared by employers and employees; premiums for the remaining two are solely paid by employers. The personal parts of premiums for the first three insurances account for 8 %, 2 % and 1 % of employee wages respectively. In other words, self-support costs in the citizenization of migrant workers account for 11 % or so of their total wages.

Given the unavailability of comprehensive data about wages of migrant workers in all regions, the aforementioned self-support costs can be estimated with either of the following methods: the average wages of urban employees in all regions multiplied by 11 %, which means the costs that migrant workers need to pay so as to reach the average wages and social security levels of urban employees; the average costs per capita paid by urban employees in all regions with respect to social security, which means costs that migrant workers need to pay so as to reach the same cost and benefit levels (i.e., the paid cost and security levels) as those of urban employees with respect to social security. This Report employs the second estimation method. The annual average social security costs that migrant workers need to pay during citizenization are 2,975, 2,742, 2,970 and 3,839 yuan across China and in eastern, central and western regions respectively, according to relevant estimates (see Table 5.8).
Table 5.8

Personal social security costs involved in the citizenization of migrant workers

Region

Item

Pension insurance (in yuan/person/year)

Unemployment insurance (in yuan/person/year)

Medical insurance (in yuan/person/year)

Total social security cost (in yuan/person/year)

East

1,987

223

532

2,742

Central

2,376

160

434

2,970

West

2,982

260

597

3,839

Nationwide

2,238

215

522

2,975

Source: calculations are based on national regulations on pension, unemployment and medical insurances, as well as relevant data from China Statistics Yearbook 2012

Total Social Costs

By summing up the aforementioned public and personal costs, we know that the average public costs in the citizenization of migrant workers in eastern, central and western regions are 176,000, 104,000 and 106,000 yuan/person respectively, with a national average of 131,000 yuan/person; the average personal costs incurred in the citizenization of migrant workers in eastern, central and western regions are 20,000, 15,000 and 16,000 yuan/person/year respectively, with a national average of 18,000 yuan/person/year. Apart from a small number of migrant workers who have become registered city residents and been included into the low-rent and public rental housing system, the vast majority27 of migrant workers still need to pay a considerable housing purchase cost, which is at least 126,000, 84,000 and 91,000 yuan/person in eastern, central and western towns/cities respectively, with a national average of 101,000 yuan/person (see Table 5.9). In 2011, the average number of people per household was 3.02 people in China.28 Given this, the average housing purchase cost paid by each household of new registered city residents would be at least 381,000, 253,000 and 275,000 yuan/household in east, central and west towns/cities respectively, with a national average of 305,000 yuan/household.
Table 5.9

Overall cost of the citizenization of migrant workersa

Item

Region

Nationwide

East

Central

West

Public costs

Urban development/maintenance costsb (in yuan/person/year)

677

716

603

547

Public service & mgmt. costsc (in yuan/person/year)

806

1,623

505

465

Social security costs (in yuan/person)

41,356

45,547

34,362

39,832

Compulsory education costs (in yuan/person)

14,180

15,066

12,384

12,616

Housing assistance costs (in yuan/person)

12,011

15,214

9,512

10,305

Total public costs (in yuan/person)

131,000

176,000

104,000

106,000

Personal costs

Living costs (in yuan/person/year)

14,710

16,981

12,139

12,351

Housing costs (in yuan/person)

100,906

126,013

83,634

91,159

Social security costs (in yuan/person/year)

2,975

2,742

2,970

3,839

Total personal costs

101,000 yuan + 18,000 yuan/year

126,000 yuan + 20,000 yuan/year

84,000 + 15,000 yuan/year

91,000 yuan + 16,000 yuan/year

Source: China Statistics Yearbook 2012, China City Statistical Yearbook 2012, China Urban Construction Statistical Yearbook 2012, the Migrant Workers Monitoring Survey Report 2011 (the NBS, 2012), the 2012 Report on China’s Migration Population Development (the DFPSM, China Population Publishing House, 2012), the Research Report on the Status of Left-behind and Rural-urban Migrant Children in China (the ACWF, 2013), and local affordable housing and social security policies

Notes:

aAll costs involved in the citizenization of migrant workers were computed according to prices in 2011

b,cBoth the average urban development/maintenance costs per capita and the average public service & management costs per capita were computed on the basis of 43 (i.e., 75–32) years

Policy Recommendations

Since urbanization in China is now on a fast track, it is expected that the Urbanization rate will reach about 68 % by the end of 2030. In other words, over 200 million more farmers will migrate to towns and cities for work. Given the current number of rural migrant workers, about 400 million rural migrant workers will need to become registered city residents. This will require 52.4 trillion yuan worth of public costs, among others. It would be extremely difficult for either governments or migrant workers to bear such high costs alone, and the key is to create a multi-party cost sharing mechanism comprising governments, companies, individuals and the market.

The Central and Provincial Governments Should Increase Financial Support for Major Destinations of Interregional Migrant Workers

The movement of migrant workers in China comes with obvious regional preferences, as eastern regions receive more than 65 % of all such workers. Specifically, the provinces of Guangdong, Zhejiang, Jiangsu and Shandong receive about 50 % of all migrant workers in China.29 Local governments are generally not active in addressing the citizenization of interprovincial migrant workers. In addition to coordinating development among regions and guiding the movement of migrant workers, the Chinese government should gradually increase financial support for provinces and regions as major destinations of these workers, and create revenue sharing and transfer payment systems based on the permanent population (rather than the population with local hukous). It should employ purpose-specific transfer payments and provide each region with annual subsidies according to the number of received rural migrant workers, with a focus on supporting local governments in terms of housing assistance, public services and compulsory education necessitated by the citizenization of migrant workers. It is also advisable to grant financial incentives to regions with outstanding performance in relevant fields. Provincial governments may also learn from the aforementioned method and set up funds specific to the citizenization of migrant workers. They should increase assistance to cities as major destinations of migrant workers and support counties and cities in providing interregional migrant workers with equal access to public services. Provincial governments should provide corresponding financial assistance especially for building affordable housing for migrant workers.

Local Governments Responsibilities

Local governments should first of all bear costs in the following two respects brought about by citizenization of migrant workers. First, they should build or expand municipal infrastructure and public service facilities so as to receive new registered city residents, and bear the corresponding urban infrastructure construction/maintenance/management costs. Second, they should increase spending on public health, housing assistance, compulsory education and employment support, work to provide new registered city residents with equal access to public services, and, with financial support from the central and provincial governments, bear the majority of costs concerning these registered city residents’ equal access to public services.

Companies Should Share the Costs of Social Security, Housing Assistance and Self-Development Brought About by the Citizenization of Migrant Workers

Migrant worker-related issues such as low income levels, lack of social security, and the absence of rights protection relate to the unavailability of public services from governments, on the one hand, and employers’ failure to provide migrant workers with basic benefits and workplace safety, on the other.30 As a result, employers of migrant workers are obligated to share the costs arising from the citizenization of these workers, whether in terms of CSR or corporate development. First, companies should obey the principle of “equal pay and rights for equal work” to make sure that migrant workers receive proper wages and benefits and are covered by basic pension, medical, unemployment, workplace injury and other insurances as required by national laws/regulations. They should share the social security costs involved in the citizenization of migrant workers. Second, companies should provide migrant workers with dormitories by constructing new buildings on unused land in their premises or by remodeling disused factory buildings whenever possible. They should work to make sure that migrant workers enroll in the Housing Provident Fund (HPF) program, are able to participate in housing development projects with funds prepaid by buyers, and have a chance to benefit from affordable housing, thereby improving these workers’ housing conditions and reducing the pressure for governments to provide newly registered city residents with housing assistance. Third and last, companies may allocate education/training expenses up to 1.5 % of the payroll, according to relevant national regulations. They should make sure that this money is used for providing professional skill training to their staff. This will continually enhance migrant workers’ capacities for citizenization and self-development while helping them cover the cost of self-development.

Migrant Workers’ Responsibilities

Citizenization is a process where migrant workers move upward socio-economically and secure better benefits. As the leading participants and beneficiaries in this process, migrant workers should above all bear basic living and self-development costs during citizenization. First, migrant workers should do their best to bear basic living expenses and part of the expenses of capacity building and the education of children, while paying the individual part of social security funds. Second, migrant workers should change their mind so that while making sure that their rights are not damaged, they exploit their rural assets and share the costs of housing assistance and social security that governments provide them, thereby minimizing the pressure facing governments and society.

Encourage Migrant Workers to Move into Cities with Assets

With regard to sharing the costs involved in the citizenization of migrant workers, it is advisable to use the power of the market so that some of these costs are paid by market-oriented means in addition to governments, companies and individuals. First, governments should step up identifying the owners of rights concerning various rural assets so that the rights to contract and operate farmland and use curtilage, house ownership, etc., are confirmed on a per-household basis. They should facilitate the quantifying of shares in collectively-owned rural assets, and step up building platforms for trading and transferring various rural assets. All these moves aim to turn the rural resources of migrant workers into assets by market-oriented means so that they can move into cities with assets, which will largely offset the high citizenization costs. Second, it is advisable to raise money by means such as issuing bonds so as to fund the massive housing and urban infrastructure construction necessitated by the citizenization of migrant workers. This may alleviate the problem of huge initial spending on the citizenization of migrant workers.

Footnotes

  1. 1.

    Shan Jingjing: The Study on Citizenization of Chinese Migrant Workers, Social Sciences Academic Press (China), 2012.

  2. 2.

    Companies may allocate education/training expenses up to 1.5 % of the payroll, according to relevant national regulations in China.

  3. 3.

    Niu Wenyuan and Liu Yijun: China’s New-Urbanization Report 2009, Science Press, 2009.

  4. 4.

    Chen Guanggui: “On housing price, costs of farmer citizenization and urbanization in China”, Chinese Rural Economy, 2004 Issue 3, p. 43–46.

  5. 5.

    Diao Chengtai and Huang Jinghong: “Economic Cost Analysis of Urban Development – the Case of Chongqing City”, Journal of Chongqing Architecture University, 2005 Issue 5, p. 1–5.

  6. 6.

    Zhen Yanlin, Chen Huailu, et al: “Measuring economic costs of urbanization – the case of Tianshui, Gansu Province”, Modern Urban Research, 2005 Issue 10, p. 57–61.

  7. 7.

    Gao Hongyan: “On economic costs of urbanization in Guiyang City”, Chongqing: a doctoral thesis at the Southwest University (SWU), 2010.

  8. 8.

    A research team of the former MOC: “On new requirements for urban development amid an influx of migrant workers into cities”, Research Report on Rural Migrant Workers in China, China Yanshi Press, 2006.

  9. 9.

    The DRC Research Team: Civilianizing the Rural migrant workers, China Development Press, 2011.

  10. 10.

    Shen Bing: “On estimating the costs of the citizenization of migrant workers in the 12th Five-Year Plan period, as well as building a cost sharing mechanism”, Urban Studies, 2012 Issue 19 (1), p. 86–93.

  11. 11.

    IUD Leader Decision Data Analysis Center: “The citizenization of migrant workers will cost 4.3 trillion yuan in the next five decades”, Decisive Information for Leaders, 2011 Issue 43.

  12. 12.

    The DSDS: China Sustainable Development Report 2005, Science Press, 2005, p. 259.

  13. 13.

    Zhang Guosheng: Citizenization of Migrant Workers in China: from the Perspective of Social Costs, People’s Publishing House, 2008.

  14. 14.

    Cao Bing and Guo Yuhui: “On the make-up of social costs of the citizenization of migrant workers”, Economic Tribune, 2012 Issue 8, p. 116–118.

  15. 15.

    Zhou Xiaogang: “On the citizenization of migrant workers during urbanization in central regions – the case of Jiangxi Province”, a doctoral thesis at Nanchang University, 2010.

  16. 16.

    The CDRF: New Urbanization in China: For a People-Centered Strategy, People’s Publishing House, 2010.

  17. 17.

    Zhou Xiaojin: “Welfare economics-based analysis of the number of migrant workers and the costs of their citizenization”, Annual Report on Guangzhou’s Rural Development (2011), Social Sciences Academic Press (China), 2011.

  18. 18.

    Zhou Xiangdong: “On estimating the transformation cost in the citizenization of migrant workers in Chongqing City, as well as a cost sharing mechanism”, a master’s degree thesis at Chongqing Technology and Business University, 2012.

  19. 19.

    The NBS: “Dynamic Floating-population Monitoring and Survey Report 2011”, http://www.stats.gov.cn/tjfx/fxbg/t20120427_402801903.htm

  20. 20.

    The DFPSM: 2012 Report on China’s Migration Population Development, China Population Publishing House, 2012, p. 196–197.

  21. 21.

    Su Ming, Zhang Libin, et al: “On the unemployment issue and fiscal policy in China”, Dec. 28, 2005, http://www.mof.gov.cn/pub/caizhengbuzhuzhan/zhuantihuigu/knqzshap

  22. 22.

    Luo Zhiqian et al: “Weighted average analysis of urban-rural inequalities in compulsory education expenses”, Journal of the Provincial Level Party School of CPC Sichuan Province Committee, 2006 Issue 1, p. 43–45.

  23. 23.

    Today, most rural migrant children are able to receive compulsory education at school in towns or cities across China, according to the Research Report on the Status of Left-behind and Rural-urban Migrant Children in China published by the ACWF in May 2013.

  24. 24.

    The DRC Research Team: Civilianizing the Rural migrant workers, China Development Press, 2011, p. 247.

  25. 25.

    Shen Bing: “On estimating the costs of the citizenization of migrant workers in the 12th Five-Year Plan period, as well as building a cost sharing mechanism”, Urban Studies, 2012 Issue 19 (1), p. 86–93. It was according to relevant data from this paper that I estimated school sizes.

  26. 26.

    Affordable housing refers to housing sold to low- and middle-income households at prices slightly higher than cost prices, making them have characteristics of social security. Since the entirety of migrant workers constitutes a low-income group, we take prices of affordable housing as the lowest personal housing costs in the citizenization of migrant workers.

  27. 27.

    This Report assumes that 20 % of migrant workers who have become registered city residents are included into the low-rent and public rental housing system and the remaining 80 % need to buy housing for themselves, but at the prices of affordable housing.

  28. 28.

    Source: China Statistics Yearbook 2012.

  29. 29.

    The NBS: the Migrant Workers Monitoring Survey Report 2011, http://www.stats.gov.cn/tjfx/fxbg/t20120427_402801903.htm

  30. 30.

    Zhang Guosheng and Yang Xianming: “On the social cost sharing mechanism in the citizenization of migrant workers from a public finance perspective”, Journal of Yunnan Finance & Economics University, 2009, 24 (1): 90–94.

Copyright information

© Social Sciences Academic Press and Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  • Jingjing Shan
    • 1
  1. 1.Institute for Urban and Environmental Studies (IUES), Chinese Academy of Social Sciences (CASS)BeijingChina

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