Author George Magnus, Research Associate at Oxford University’s China Centre, features research from Scott Rozelle in this Financial Times letter.
This article was originally published in The Wire China on June 20, 2021. You can see the full article here.
A: Well, China has 1.4 billion people, and nearly 70 percent of them are rural. That’s more than 900 million people. That means one out of nine people in the world is from rural China. They’re factory and construction workers. They’re in the informal service sector. They’re the ones who sweep the streets and collect the garbage and deliver the packages to the door and open little stores and sit on the curbside and hawk apples and plums.
The ironic thing is that even though there are so many of them, in many ways they are invisible to the outside world. They mostly live in villages in central and western China, which is a separate world from the cities that we see on CNN or read about in The New York Times. They have to send their kids to rural schools in their own remote local counties. They get their health care in home counties.
In fact, in a number of ways it’s very much like the United States. We have 40,000 school districts in the United States. China has 40,000 school districts. All the school districts in the U.S. are funded by local property taxes. So if you’re rich, like Palo Alto [California] or Cambridge [Mass.], you have lots of resources to invest in your schools. About the only people they hire as new teachers at Palo Alto High School have PhDs. But if you’re in Fresno, California, or in the Appalachians or Mississippi, property taxes are really low, so the localities cannot afford to have very good schools.
The same thing happens in China. Schools are supported by local fiscal resources, which in rural counties are terribly scarce. So you’ve got this system where there’s really two castes: a rural caste and an urban caste. You can move from rural to urban if you get a college degree but that tends to be very hard.
In fact, China has some of the highest rates of inequality in the world. And yet many of these people will say, “I’m much better off than my parents were…” And until now, this has sort of allowed them to buy into the system. There is also a long-held belief that the progress of the past will continue; that they will be better off 10 years from now. This is the China dream.
But if some of those people at the bottom begin to lose hope that the future will be better — and, if they see the lives of others, meanwhile, continuing to improve — you could start to have the emergence of a polarized society where wages for those in the lower income strata start to top off or even fall, and their employment prospects also fall. People could begin to say, “I don’t know what my life is going to be like 10 years from now.”
That’s what I try to address in the book; precisely that danger. It’s not a 100 percent certainty that the economy is going to unfold in that way, but if polarization does begin to emerge, hope for a better life would begin to fade for a large segment of society. And if it is going to happen, it is likely to begin to unfold now, since this often happens when a nation tries to go from an upper middle income society to a high income one; the nature of jobs change and the nature of opportunities in high-skilled economies changes.
In this article by the Wire Scott Rozelle, SCCEI Co-Director and development economist, talks about the middle income trap, educating China's children, and why we should all want China's economy to succeed.
"Other countries might be able to address their shrinking workforce by replacing quantity with quality. But according to Invisible China, a new book by Scott Rozelle and Natalie Hell, the Chinese labour force has one of the lowest levels of education of any comparable country..."
Author Nathan Vanderklippe quotes Scott Rozelle and references his research about the need for improved parenting education in rural China to reduce the number of cognitively delayed babies across rural China.
This article features Scott Rozelle's research on China's demographics and labor force in China. Rozelle's work indicates that China has a lower quality work force "because China has failed to provide education for all youth through high school, particularly in rural areas."
The Manila Times references Scott Rozelle's newest book "Invisible China" while discussing China's ability, or lack there of, to replace its aging labor force.
In this piece written by Hoover senior fellow Elizabeth Economy for Foreign Affairs, Economy highlight's Scott Rozelle's research detailing the lack of educational opportunities—in terms of both access and quality—necessary for many in rural China to be able to participate effectively in the country’s rapidly emerging technological revolution.
This article was originally published on VoxChina. See the full article here.
According to World Bank data, only a handful of economies have risen from middle to high income since 1960. Examples include South Korea, Singapore, Israel, and Ireland. Some countries that were high income in 1960 are still high income today, such as Denmark and Japan. Others, like Myanmar and North Korea, remain poor. But a large group of countries has remained middle income for decades, seemingly unable to reach high-income status.
Will China be one of those countries that gets stuck in what is called the “middle-income trap”? One key factor that may account for why some countries “graduate” from middle income to high income while others “get stuck” is education. The share of workers in the entire labor force (individuals between 18 and 65 years old) with a high school degree in countries that graduated to high income was 72% when they were still middle income (OECD, 2016). Conversely, in countries that have failed to exit middle-income status, the share is much lower—36% on average.
Having a large supply of educated workers ensures that enough talent exists to meet and drive demand for the high-skill jobs that exist in high-income countries, thereby sustaining growth (Diacan and Maha, 2015). When there are too many unskilled workers, they are unable to find employment in upgraded industries. And, since these unskilled workers cannot work in the high-end, formal economy, they crowd into the unskilled sector causing their wages to stagnate. Finally, when a large share of the labor force faces stagnating income, this curtails demand, hampers growth, and can eventually lead to polarization and social problems, such as more crime, higher rates of unemployment, and social unrest.
How does China measure up? One of the most surprising facts in our book, Invisible China: How the Urban-Rural Divide Threatens China’s Rise, published by the University of Chicago Press (October 2020), is that the share of uneducated workers in China's labor force is larger than that of virtually all middle-income countries. According to census data (that is, the government’s survey of 1.4 billion people), there are roughly 500 million people in China between the ages of 18 and 65 without a high school degree—or 70% of the labor force (National Bureau of Statistics, 2010; Khor et al., 2016; Yu et al., 2019).
Why has China not noticed this problem in the past? In fact, a large population of relatively uneducated workers was not a problem as China was in the process of moving from low to middle income. During the 1980s, 1990s, and early 2000s, unskilled wages were low and there was growth in employment in low-cost manufacturing and construction (Lin, Fang, and Zhou, 1996; Wei, Zhuan, and Zhang, 2017). But China's growth model is changing as the country has moved toward upper-middle income. Unskilled wages are much higher, and the lure of cheaper labor elsewhere (Wolcott, 2018) and China's massive push to automate is potentially beginning to render a large share of China’s low-skilled workers redundant (Li et al. 2010; Li, et al. 2012; Hong, et al. 2019). Construction jobs have tapered off as investment in infrastructure cools. These factors suggest some significant fraction of China's unskilled workers may be increasingly unemployable as the formal economy upgrades.
The only destination for China's unskilled workforce—whether new entrants or laid-off workers from manufacturing or the construction sector—is the informal service sector, a sector that is characterized as having no (or low) benefits and low coverage under the nation’s labor laws. Informal jobs also are plagued by uncertainty regarding working hours and earnings. Informal employment is currently the fastest-growing sector in China, increasing from 33% in 2004 to 56% in 2017 (National Bureau of Statistics, 2018). The rapidly rising supply of workers (with a relatively slow rise in the demand for services) seems to be ushering in an era that may be characterized by stagnating wages for unskilled workers. Meanwhile, strong demand for skilled work means higher wages for those with an education. Taken together, it is plausible that China is now on the brink of systematic wage polarization.
The result may come to resemble Mexico (or Turkey or South Africa), which is a case of solid macroeconomic performance, export success, and accumulation of physical capital, yet little growth in the formal economy due to the problems and forces that are unleashed by a rapidly growing informal economy and falling low-skill wages (Levy, 2008).
Does China’s government know about this problem? In some sense China’s government seems aware that its labor force is undereducated. Specifically, recognizing the critical need for secondary education, China's government in the past decade has expanded access to high school throughout the country. High school attainment among the youngest cohorts in the labor force is close to 80% (Yu, 2019). But hundreds of millions of less-educated people will remain in the labor force for the next 30 years. The government will face huge challenges trying to either retrain workers or provide a social safety net for them.
The quality of China's expanded secondary school education also is uncertain. On the one hand, China’s Ministry of Education should be praised for increasing upper secondary education attainment by more than 10 million slots over the past decade or so. But, despite this success in making slots available, rural human capital still has key weakness. In the new book, we document how nearly two-thirds of China’s future labor force comes from rural areas, where the school systems are under-resourced, and still today rural school-age children suffer from health and nutrition problems (e.g., anemia, intestinal worms, and uncorrected myopia) that undermine their ability to learn. When school-aged children do enter the new upper secondary schools, many of the programs in the vocational high schools are of poor quality. Even more fundamentally, systemic shortfalls in early childhood education may also render many young people unprepared to learn complex skills that they will need if they are to be constructive participants in China’s future high-skill/high-wage economy.
The risks of a stagnating China would reverberate far beyond its shores. Its sheer size—one-fifth of the world’s population—means what happens inside China will have outsized implications for foreign trade, global supply chains, financial markets, and growth around the globe. While beyond the expertise of an economist, there are those who believe a stagnating China might take actions that could spill over into regional politics. In the end, no assessment of China's growth is complete without considering the implications of having hundreds of millions of underemployed people in China's economy for the foreseeable future. The bottom line is that China needs to build on its recent efforts to boost rural education, health and nutrition, and early childhood development, and do so at a pace and intensity that recognizes these are potentially among the biggest problems the nation faces. There also needs to be a huge effort to retrain the labor force or at least put together a safety net that will keep China’s massive rural labor force and their families feeling that they are part of the rise of the nation.
This article is a synopsis of Invisible China: How the Urban-Rural Divide Threatens China’s Rise (University of Chicago Press, October 2020).
(Scott Rozelle is the Helen F. Farnsworth Senior Fellow and the co-director of the Rural Education Action Program in the Freeman Spogli Institute for International Studies at Stanford University; Natalie Hell is a writer based in the San Francisco Bay Area.)
According to World Bank data, only a handful of economies have risen from middle to high income since 1960. But a large group of countries has remained middle income for decades, seemingly unable to reach high-income status. Will China be one of those countries that gets stuck in what is called the “middle-income trap”?
SCCEI director Scott Rozelle's research on the disadvantages to the hukou education system in China is featured in this article published in "The Economist." Rozelle is quoted saying, “It is really, really clear that it is now much, much harder for a poor, rural kid to get into a good university.”.
