Announcement of People’s Republic of China has Achieved Major Gains in Overcoming Unemployment, World Bank Study Says on February 14, 1980

. FOR 'IMMEDIATE RELEASE~. . 'NorldBank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE February 14, 1980 PEOPLE'S REPUBLIC OF CHINA HAS ACHIEVED MAJOR GAINS IN OVERCOMING UNEMPLOYMENT, WORLD BANK STUDY SAYS The People's Republic of China has made signi· .cant progress toward full employment for over 400 million men and women in its labor force. The success of the world's largest country in providing employ- ment for a labor force that increased by roughly 150 million people between 1957 pnd 1975 was primarily the result of the ability of the agricultural sector to absorb two thirds of those new workers. T-hese conclusions are reached in a World Ban'-: publication • released today. The 194-page publication entitled Economic Growth and Employment in China is by Thomas G. Rawski, associate professor of economics at the University of Toronto. It is published by Oxford University Press. Collectivization and Mechanization Professor Rawski states that the large increases in demand for labor in the farm sector were facilitated by two principal changes: by the collectivization of farming and by the rapid growth in the availability of manufactured farm supplies. In the early years of the communes, serious problems appeared largely because of the erosion of economic incentive, and these difficulties contributed heavily to the disastrous harvests of 1959-61. Growth of experience, abandonment of full communism, and the return of control over cultivation and distribution to the production team level have overcome most but not all of these difficulties, says Professor Rawski. In recent years, communes have succeeded in mobilizing labor to implement projects in water conservancy, land improvement, roadbuilding, and irrigation without severing the indispensable link between individual (or household) effort and income . • . .. I  - 2 - The second major change that has contributed to the development of China's agriculture since 1957, according to the study, is the in- creasing availability of industrial supplies, including power, machinery, building materials, steel, petroleum products, and chemical fertilizer. These supplies include products from small and medium-size enterprises, • which are widely dispersed throughout the country. Cement, steel, and explosives helped water conservancy and land improvement projects; pumps moved irrigation water or drained excess water; chemical fertilizers combined with increased water supplies raised crop yields; and electric power facilitated mechanization. The report points out that as a result, agricultural production increased and demand for farm labor rose. Professor Rawski notes that rural electrification and the use of farm machinery spread rapidly through the Chinese countryside in the mid- 1960s. "China now stands on the verge of major efforts to mechanize some basic field operations, principally the transplanting of rice. 11 Farm mechanization in China has not hurt employment, the study says, because the farming system has been modified so that the mechanization complements rather than competes with rural labor. • These modifications include intensification of cropping practices and the cropping cycle, increasing adoption of labor-using plant and animal product, and massive farmland construction campaigns that have contributed to agricultural development by a simultaneous raising of output and absorp- tion of rural labor. Industrial Employment On employment in the industrial sector, the study says, "The growth of industrial employment, though impressive in absolute terms, is reiatively modest in comparison with the extent of industrial expansion. 11 This is largely a reflection of China's strong incentives to raise labor productivity and hence to limit labor requirements. China's economic planners, Professor Rawski say,s, are mindful of costs attached to industrial employment in the state sector. Such costs include relatively higher wages for industrial workers compared with those in the agricultural sector, and provision of urban housing, pensions, welfare, and fringe benefits. Higher personal consumption resulting from higher wages also reduces the surplus available for investment and necessitates production of more consumer goods. Thus, managers are encouraged to make the most of existing resources. ... I •  - 3 - ~ Growth in industrial employment is also limited by bureaucr~tic obstacles which make it difficult for managers to obtain additional workers, according to Professor Rawski. Urban Employment Discussing urban unemployment, the study says that involuntary unemployment in China's cities is limited by controls over peasant migration that include a system of travel permits and grain rations which tie workers to their 1oc·a 1 it i es. Most peasants a re a 1so expected to pa rt i c i pate in winter construction projects in the countryside. The largest urban group that could be described as unemployed, the study says, consists of young men and women who have abandoned rvral assignments without permission. Even if such "returnees" number several million of the 12 million young people transferred from urban to rural areas since 1966, the study points out that the resulting scale of unemployment among an urban labor force of close to 100 million persons is not severe when compared with conditions in other large and populous low-income countries. • Costs and Achievements These significant achievements, 11 the study observes, 11 have not 11 been without cost. The modest rise in the average value of output per man-year in agriculture occurred only because the increase in the number of days worked by commune members offset the ~~rl"~tion in the averag, value of output per man-day in agriculture. 11 In addition, the report points out, available data show that overall factor productivity dropped substantially between 1957 and 1975 in the country's agricultural sector. Summing up the employment situation in China, the report concludes: "Open unemployment appears limited largely to illegal urban residents ... In the countryside there has been a general rise in the availability of work over the past two decades. 11 Professor Rawski warns that although major gains have been made in overcoming rural unemployment, it would be premature to claim that agricultural labor in China is fully employed. On recent reports that new problems of voluntary rural idleness have ap?eared, the study says that the problems may be localized and may be solved by administrative changes or improved supplies of consumer goods . . . ./ •  - 4- capi ta. 11 "Despite these problems," the study states, "the improved availability of work is an impressive achievement for a densely populated country with a fixed land base, substantial labor growth, and an average annual income of about $400 (at 1977 prices) per • Transferability of China's Experience On the question of the transferability of China's experience to other developing countries, the study says that 1 'several fundamenta 1 features of China's political economy do appear to stand in the way of wholesale application of Chinese methods to problems confronting other developing countries." These features include the centuries-old practice of intensive agriculture which is well suited to the Chinese countryside, widespread entrepreneurship among farmers, effective administration at all levels, the existence of a widely based industry to service agriculture, and a tradition of social control that allows the Chinese government to carry out policies that might be difficult or impossible elsewhere. Another important feature is the wealth of experience of solving problems within industry which resulted from China's isolation from trade • and outside aid. Wholesale transfers of the strategies and mechanisms that have contributed to China's economic achievements into other developing countries, therefore, is difficult to envision, according to the study. Even so, the study adds, China's experience suggests a variety of opportunities for other countries facing similar combinations of circumstances. Professor Rawski says that additional labor can be absorbed on farms through measures including increased application of organic manures, more intensive tillage, adoption of labor-using farm activities, and an improved network of water control and irrigation facilities. In China, the increased availability of manufactured farm supplies, both chemical and mechanical, appears to have contributed to a growing demand for farm labor, according to Professor Rawski. On the reliability of the statistics produced by the Chinese government, the report says that there is "absolutely no evidence'' that Chinese government offices or economic enterprises maintained separate books for internal administration and for external publicity. •