Employment Discrimination

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Employment Discrimination Wage Discrimination
against Migrating Peasants in Urban Labor Market
of China A Decomposition Method Zhang
Yuan China Center for Economic Studies, Fudan
University Yiu por Chen City University of Hong
Kong
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Structure of This Paper 1. Institutional
Background and Research Motivation 2. Literature
Review 3. A New Decomposition Method 4. Data
Source and Application of the New Method 5.
Conclusion and Policy Implication
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1. Background and Motivation Background Hukou
(household registration) System Giving priority
to heavy industries ? Urban biased ?
Hukou Vacate the Cage and Change the Bird 268
million migrating peasants in 2013 (NBS of China)
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Motivation A. Urban labor market segregated.
employment discrimination, or wage
discrimination? B. Urban labors are over-paid,
and migrating peasants are under-paid Which part
is more important? C. Wage differential
decomposition sheds very little light on the
determinants of discrimination against migrating
peasants in urban China.
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Questions Becker(1957), Arrow(1973), Dickens and
Kevin(1985), Cotton(1988) Minorities suffer
unfair treatment on both employment and wages
only because of different gender or racial. We
call them employment discrimination, and wage
discrimination. Minorities are paid less than
their marginal product, while majorities are paid
more than their marginal product. We call them
under-paid, or over-paid, respectively. A. To
what extent that total discrimination index is
attributable to employment discrimination or wage
discrimination? B. To what extent that total
discrimination index is attributable to over-paid
index or under-paid index? C. What are the trends
of them over time in urban China?
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2. Literature Review A. Segregated labor
market Doeringer and Piore(1971) Dual labor
market (primary and secondary labor
market) Two-tier labor market in urban
China Meng and Miller(1995) Wang and Zuo
(1999) Knight et al. (1999) Meng(2000) Meng
and Zhang(2001)
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B. Migrating peasants have less opportunities to
get jobs in the formal sectors, and even in the
same sector, other things being equal, migrating
peasants are paid less than their counter parts
in urban labor market Meng and Miller (1995)
Knight et al. (1999) Meng (2000) Meng and Zhang
(2001) Yang and Chen (2000) Cai et al. (2000
2003) Dong and Bowles (2002) Wang (2003 2005)
Yan (2006 2007) Li and Li (2008) Démurger et
al. (2009) Zhang et al. (2013). In the
segmented urban labor market of China, urban
labors are over-paid, and migrating peasants are
under-paid. Knight et al. (1999) Meng (2000)
Meng and Zhang (2001).
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C. Decomposing wage-differentials between
migrating peasants and urban labors, proposed by
Blinder-Oaxaca-Cotton, Brown et al..
Blinder (1973) defines DCU as a measure of that
portion of the total differential attributable to
discrimination.
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Brown et al. (1980) Decomposition
Discrimination IWD
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Using Brown et al. (1980) decomposition method,
Meng and Zhang (2001), finds that a significant
difference in occupational attainment and wages
exists between rural migrants and urban
residents. Most of the difference cannot be
explained by productivity-related differences
between the two groups, implying that urban
residents are favorably treated while their
migrant counterparts are discriminated
against. Employing a similar decomposition,
Démurger et al. (2009) finds that, the impact of
sector allocation on earnings differences between
migrating peasants and urban labors is neither
strong nor robust. And also, they find a
stronger, but only partly robust within sector
earnings discrimination effect between urban
residents and rural migrants. Using Oaxaca
(1973) and Brown et al. (1980) decomposition
method, Wang (2003 2005) finds that more than 43
per cent of wage differentials is attributable to
discrimination against migrating peasants and
other un-observables. Employing
Blinder-Oaxaca-Cotton method, Xie and Yao (2006)
arrives at similar conclusions.
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Blinder-Oaxaca-Cotton-Brown-Neumark
decomposition, First, the discrimination
component from these methods is not an accurate
measure of discrimination (Meng and Zhang, 2001
Liu et al. 2004 Jann, 2008). Second, these
methods reveal nothing about the role of job
discrimination and wage discrimination, or the
role of under-pay and over-pay in the total
discrimination index. Third, these methods
cannot be applied to a segregated labor market,
because the wage equations in two sub-labor
markets are different.
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Zhiming Cheng, Fei Guo, Graeme Hugo, Xin Yuan,
2013, Employment and Wage Discrimination in the
Chinese Cities A Comparative Study of Migrants
and Locals, Habitat International, 39,
pp.246-255. Liu Pak-Wai, Junsen Zhang, Shu-Chuen
Chong, 2005, Occupational Segregation and Wage
Differentials between Natives and Immigrants
Evidence from Hong Kong, Journal of Development
Economics, Vol. 73, pp. 395-413.
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3. A New Decomposition Method Measure of
discrimination (Oaxaca,1973)
u urban labors r rural migrants overp
over_paid underp under_paid o no discrimination
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Two-tier labor market with discrimination
Assumption labor supply and individual
characteristics are fixed (Neumark, 1988 Butler,
1982)
Two-tier labor market without discrimination
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Gross over-pay for U1U2 urban labors
over-pay attributable to
wage discrimination
over-pay attributable to employment
discrimination Gross under-pay suffered by
R1R2 rural migrants
under-pay attributable to wage discrimination
under-pay attributable to
employment discrimination
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Take averages and substitute them into the
measure equation,
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4. Data Source and Application China Household
Income Project, 2002-2007 Urban
samples Migrating peasants
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Definition of Two-tier Labor Market
Market 1 Market 2
Ownership SOEs or state controlling enterprises others
Sector Supply of electronic, gas, and water Transportation, warehouse, postal service Finance and insurance Real estate Culture, education, health, sports, broadcast television State organs (Most of public sectors) others
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Employment distribution in two-tier labor market
2002 2002 2007 2007
Market 1 Market 2 Market 1 Market 2
Migrating peasants 21.64 78.36 33.55 66.45
Urban labors 78.31 21.69 75.10 24.90
Mean hour wage in two-tier labor market (RMB
Yuan)
2002 2002 2007 2007
Market 1 Market 2 Market 1 Market 2
Migrating peasants 3.11 2.35 6.63 5.33
Urban labors 6.33 4.37 13.61 9.29
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How to deduce the wage level without
discrimination?
Oaxaca(1973)
A. Estimate the wage function using male samples,
substitute characters of female into the wage
function B. Estimate the wage function using
female samples, substitute characters of male
into the wage function Index Number
Problem Cotton (1988) Reimers (1983) Neumark
(1988) C. Estimate the wage function using male
and female samples, respectively, weight these
two functions with their shares in the labor
market, and get the weighted average wage
function, then, substitute their characters into
this weighted average wage function.
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How to deduce the employment distribution without
discrimination?
Urban labors Urban labors Migrating peasants Migrating peasants
Market 1 Market 2 Market 1 Market 2
Without discrimination 50 50 50 50
Probability 50 50 50 50
With discrimination 505 50-5 50-5 505
Probability 505 505 50-5 50-5
Gap of probability attributable to discrimination 55-4510 55-4510 55-4510 55-4510
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Urban labors Urban labors Migrating peasants Migrating peasants
Market 1 Market 2 Market 1 Market 2
Without discrimination 100 100 50 50
Probability 50 50 50 50
With discrimination 10010 100-10 50-10 5010
Probability 505 505 50-10 50-10
Gap of probability attributable to discrimination (ß) ß55-4015 ß55-4015 ß55-4015 ß55-4015
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A. Run Probit (or Logit) model using full
sample, controlling a dummy variable for
migrating peasants, and other characters. The
marginal effect of the dummy variable measures
the probability gap attributable to
discrimination, i.e. ß, other things being
equal. B. Restore the probabilities of entering
Market 1 without discrimination according the
above equations. C. Move ? urban labors in Market
1 with the lowest probabilities into Market 2,
move ? rural migrants in Market 2 with the
highest probabilities into Market 1.
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Determinants of Probability of Entering Market 1
2002 2002 2007 2007
Logit Probit Logit Probit
Migrant -1.650 -1.002 -1.174 -0.723
(0.062) (0.036) (0.061) (0.037)
Age -0.089 -0.049 -0.006 -0.002
(0.024) (0.014) (0.019) (0.011)
Age_sq 0.001 0.001 0.000 0.000
(0.000) (0.000) (0.000) (0.000)
Male 0.355 0.201 0.069 0.039
(0.046) (0.026) (0.049) (0.029)
Married 0.135 0.068 -0.063 -0.036
(0.099) (0.057) (0.082) (0.049)
Education 0.151 0.086 0.115 0.069
(0.008) (0.005) (0.009) (0.005)
Experience 0.113 0.068 0.028 0.020
(0.009) (0.005) (0.010) (0.006)
Experience_sq -0.001 -0.001 0.001 0.000
(0.000) (0.000) (0.000) (0.000)
Provincial Dummy YES YES YES YES
Observation Pseudo R2 12945 0.2740 12945 0.2733 9042 0.1671 9042 0.1669
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2002 2007
Migrating peasants 0.24492 0.16857
Urban labors -0.07930 -0.08392
? 775 515
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Wage equation in two-tier labor market - 2002
Market 1 Market 1 Market 2 Market 2
Migrating peasants Urban labors Migrating peasants Urban labors
Male 0.891 0.423 0.618 0.395
(0.200) (0.135) (0.202) (0.172)
Age 0.208 0.248 -0.110 0.287
(0.080) (0.081) (0.097) (0.088)
Age_sq -0.002 -0.002 0.002 -0.003
(0.001) (0.001) (0.001) (0.001)
Married -0.416 0.557 0.453 -0.263
(0.345) (0.325) (0.441) (0.373)
Schooling year 0.092 0.305 0.143 0.194
(0.040) (0.026) (0.043) (0.031)
Experience -0.027 0.037 0.106 0.047
(0.055) (0.032) (0.083) (0.035)
Experience_sq 0.002 -0.001 -0.002 -0.001
(0.003) (0.001) (0.006) (0.001)
Constant -2.266 -4.724 8.985 -0.043
(2.088) (1.781) (3.517) (1.661)
Industrial dummies YES YES YES YES
Ownership dummies YES YES YES YES
Provincial dummies YES YES YES YES
Observation Adjusted R2 1460 0.0897 6883 0.1899 1706 0.0848 2896 0.1815
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Wage equation in two-tier labor market - 2007
Market 1 Market 1 Market 2 Market 2
Migrating peasants Urban labors Migrating peasants Urban labors
Male 0.794 0.112 1.036 0.009
(0.249) (0.456) (0.258) (1.090)
Age 0.339 -0.080 0.210 0.429
(0.100) (0.195) (0.102) (0.428)
Age_sq -0.005 0.000 -0.003 -0.006
(0.001) (0.002) (0.001) (0.005)
Married -0.194 1.373 0.203 1.766
(0.347) (0.886) (0.369) (1.912)
Schooling year 0.315 0.141 0.193 0.395
(0.053) (0.077) (0.062) (0.193)
Experience 0.272 0.299 0.358 0.432
(0.063) (0.072) (0.094) (0.223)
Experience_sq -0.010 -0.005 -0.017 -0.013
(0.003) (0.002) (0.007) (0.007)
Constant -2.752 8.226 0.479 0.048
(2.596) (4.324) (5.061) (9.430)
Industrial dummies YES YES YES YES
Ownership dummies YES YES YES YES
Provincial dummies YES YES YES YES
Observation Adjusted R2 1528 0.1241 4007 0.1267 1471 0.1143 2016 0.0288
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Two-tier labor market without discrimination
Urban labors Urban labors Migrating peasants Migrating peasants
Number Hour wage Number Hour wage
2002 Market 1 7658-7756883 6.33-0.365.97 6857751460 3.110.273.38
2002 Market 2 21217752896 4.37-0.423.95 2481-7751706 2.350.202.55
2007 Market 1 4604-5154089 13.61-1.6811.93 10245151539 6.632.779.40
2007 Market 2 15275152042 9.29-1.298.00 2028-5151513 5.330.816.14
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Total discrimination index and its components
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5. Conclusion and Policy Implication A. Total
discrimination index more than doubled from 2002
to 2007, which is mainly attributable to
increasing of wage discrimination. B. In 2002 and
2007, total discrimination index is mainly
composed of wage discrimination, rather than
employment discrimination. C. In 2002 and 2007,
total discrimination index is mainly composed of
under-pay which is suffered by migrating
peasants, rather than over-pay which is related
to urban labors. So, Future anti-discrimination
legislation should be directed more at promoting
equal pay, and at eliminating the under-pay
suffered by migrating peasants without urban
Hukou.
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Thank you for your attention! zhangyuanfd_at_fudan.
edu.cn