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Jun Han Nankai University Shi Li Beijing Normal University. Is I mmigration Beneficial to Urban Residents? The E ff ect of Labor Migration on the Wage Structure in China. Main Questions. What is the role of migration in certain labor market behaviors such as inequality?
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Jun Han Nankai University Shi Li Beijing Normal University Is Immigration Beneficial to Urban Residents? TheEffect of Labor Migration on the Wage Structure in China
Main Questions • What is the role of migration in certain labor market behaviors such as inequality? • How does migration affect inequality? • What are the effects of migrants on urban residents?
Contributions of This Study New evidence on the relationship between massive internal migration and wage structure of China. Analysis on social effect of migration, which has been rarely analyzed in the literature. The first study that analyzes the effect of migration on the wage structure of immigration region, emigration region, and the overall regions.
Structure Data description and introduction of migration and migrants in China. The own effect: the impact of migration on migrant wage. The social effect: the effect of migration on the wages of urban residents. The effects of migration on education premium, inequality and residual inequality within city. The counterfactual results of inequality after removing own effect and social effect in the overall country.
Literature • The discrimination and convergence in wages and difference in cohort quality (Borjas 1985, 1995, 1996 and 2003) • The impact of immigration on labor market outcomes such as wages, native employment, and inequality (Card 2001, 2005, and 2009; Smith 2006)
Literature The wage structure (Katz and Murphy 1992; Murphy and Welch 1992; Juhn, Murphy and Pierce 1993; Lemieux 2006) Wage structure in China ( Zhang, Zhao, Park and Song 2005; Han 2006; Zhang, Han, Liu and Zhao 2008; Han, Liu and Zhang 2011). The effect of labor supply of some groups on others' wages or the wage structure (Juhn and Kim 1999; Acemoglu, Autor and Lyle 2004; Hsieh and Woo 2005)
Migration and Migrants in China • We use the data from China’s 2005 minicensus, which surveyed 1 percent of the Chinese population using a multistage sampling design. • The 2005 minicensus is unique with specific information on wages and work-related variables. • The 2005 income data is valuable as it consists of the incomes of migrants, who are severely undersampled in the annual urban household survey conducted by the National Bureau of Statistics (NBS).
Job Distribution of Migrants in Different Industries and Occupations
Job Distribution of Urban Residents in Different Industries and Occupations
The Effect of Migration on Wage • The empirical model is set as follows: • Because we analyze the returns to migration, the sample only consists of migrants and rural residents. • As there exists a problem of potential endogeneity, we use instrument variable (IV): social network of an individual.
OLS results would bias the estimation results downward. • Women's migration premium is higher than men's.
The Social Effect of Migration • When migrants enter cities, they may crowd out job opportunities of local urban residents, which can be defined as substitution effect. • However, there might be social effects of migration: complementary effect of migration on natives. • The empirical model is set as follows: • We use two sets of IVs here: number of origins of migrants in this city as IV1, and origins of migrants from first-tier, second-tier, third-tier, and fourth-tier cities as IV2.
The significant and positive coefficients indicate that migrants have complementary impact on natives rather than substitution effect. • OLS results tend to underestimate the social effect of migration. • The elasticity (coefficient) means that native wage increases 2.2% when the fraction of migrants in this city increases 10%. • Migration has different effects on different education groups of natives: higher-education natives benefit more from migration as the complementary effect is higher.
The Effect of Migration on City Wage Inequality • We will analyze: • How migration affects the education premium of natives. • How migration affects the inequality within the city. • How this impact of migration on inequality is caused by the residual inequality.
Migration and Residual Inequality • We have found that migration can increase the college premium and lower-tail wage inequality of urban residents, while the effect is smaller on high-school premium and higher-tail wage inequality. • There must be some other factors, such as within-group inequality (or residual inequality), which will be discussed in this subsection. • Most of studies have focused on the between-group inequality while few have touched upon the within-group inequality. Our study provides a new evidence on the effect of migration on within-group inequality in China.
The Role of Migration in the Wage Inequality of China • We have analyzed that own effect and social effect can affect the wage structure and city inequality. • We conduct a counterfactual analysis of how the own effect and social effect affect the inequality of the whole country. • Because the individual situation is more complicated and we only classify not so specifically, our analysis only provides a lower bound of the counterfactual inequality excluding migration. • Because own effect and social effect mainly differentiate between group inequality rather than within-group inequality, we cannot take into account the residual inequality here.
Own effect has little effect on the inequality of the whole society, only reducing lower tail while raising upper tail to a little extent. • However, social effect can enlarge the wage inequality to some extent. Social effect contributes around 4.8% to the overall wage inequality. • For rural residents, the counterfactual wages at different percentile are similar as the original wages, which reveals there is almost no effect.
Concluding Remarks • China provides a unique experience of massive internal migration with the segregation of jobs between migrants and natives. • Under this circumstance, there exists complementary effect of migration on native wages, rather than the imperfect substitution effect that has been found in the literature. • We find that the elasticity of complementation of migrants is about 0.27, 0.185 and 0.122 for native college-, high-school-, and dropout-educated workers.
Migrants can benefit from migration, which results in the wage rise at about 13.9%. • Although this is a great improvement, the ``own effect'' cannot affect the overall inequality of the society a great deal. • The ``social effect'', which is the complementary effect, affects the overall inequality to a large extent. Almost 4.8% of the overall inequality can be explained by this ``social effect''.
If we only consider the urban residents, migration has also increases the college premium greatly while it does little to high-school premium. • Migration increases the wage inequality of urban residents, with the effect on lower-tail inequality higher than that on upper-tail inequality.
Policy Implication • Migrants have made great contributions to cities (in particular the promotion in productivity of natives) and cities should be more concerned about the welfare of migrants. • There are still many more barriers in welfare in addition to hukou, such as the low social security and medical care, high burden and frequent overtime shift, low or no salary for overtime work, discrimination for children education, and etc.
Low welfare and wages might keep migrant away from cities. • There has been an inverse flow of migrants recently, due to the industry upgrading and rise in the labor costs. • How this inverse flow affects the wage structure and other labor market behaviors will arouse more interests and further related study.
