UNEMPLOYMENT IN COMMUNIST CHINA 1950-57

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A001000070001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 38
• Document Creation Date: December 23, 2016
• Document Release Date: April 16, 2013
• Sequence Number: 1
• Publication Date: January 24, 1958
• Content Type: REPORT

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SECRET
ECONOMIC INTELLIGENCE REPORT
N? 3
UNEMPLOYMENT IN COMMUNIST CHINA
1950-57
CIA/RR 122
24 January 1958
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
SECRET
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This material contains informaticn affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Sees. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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S-E-C -R-E-T
ECONOMIC INTELLIGENCE REPORT
UNEMPLOYMENT IN COMMUNIST CHINA
1950-57
CIA/RR 122
(ORR Project 45.1590)
Office of Research and Reports
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FOREWORD
This report is designed to describe conditions of unemployment in
Communist China and to evaluate the official program for meeting these
problems. The contradictory nature of the evidence on unemployment
indicates that the Chinese Communists have neither defined the problem
systematically nor collected any precise or reliable statistical data.
Even though a statistical analysis of the problem is thereby precluded,
this report attempts to select information on employment and industri-
alization which, when brought together, points up serious economic
problems that eventually will have to be met by the Chinese Communists.
The effect of a rapid growth in population on the future manpower
problems of Communist China has not been treated extensively in this
report, because a subsequent report is planned on that subject.
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CONTENTS
Summary . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
I. Introduction . . . . . . . . . . . . . . . . . . . . . 3
A. Visible Unemployment . . . . . . . . . . . . . . .
B. Seasonal Unemployment . . . . . . . . . . . . . . .
C. Disguised Unemployment . . . . . . . . . . . . . .
II. Unemployment in the Agricultural Sector . . . . . . . . 4
A. Surplus Labor in Agriculture . . . . . . . . . . . 4
B. Rural Labor Policies Under the Communists . . . . . 6
1. Collectivizing the Peasantry . . . . . . . . . 6
2. Mass-Labor Projects . . . . . . . . . . . . . . 7
a. Corvee Labor . . . . . . . . . . . . . . . 8
b. Forced Labor . . . . . . . . . . . . . . . 8
3. Subsidiary Occupations . . . . . . . . . . . . 9
III. Unemployment in the Nonagricultural Sector . . . . . . 9
A. Growth of Urban Population, 1950-57 . . . . . . . . 10
1. Migration to the Cities . . . . . . . . . . . . .11
2. Evacuation of Surplus Urban Population . . . . 12
B. Employment in Commercial, Handicraft, and
Service Occupations . . . . . . . . . . . . . . . 13
C. Surplus Labor in Modern Industry . . . . . . . 15
IV. Official Policy Toward Unemployment . . . . . . . . . 20
V. Prospects . . . . . . . . . . . . . . . . . . . . . . . 24
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Appendixes
Page
1. Commercial Workers in Socialized and Private Employment
in Communist China, 1950, 1952, and 1955 . . . . . . . 15
2. Relationship of Capital, Output, and Employment in the
Cotton Weaving Industry of India . . . . . . . . . . . 27
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CIA/RR 122 S-E-C-R-E-T
(ORR Project 45.1590)
UNEMPLOYMENT IN COMMUNIST CHINA*
0-57
1,950-57
Summary
Unemployment in Communist China -- which is essentially under-
utilization of labor -- has been a persistent problem for the
Communists since 1950 and promises to remain so through the Second
Five Year Plan (1958-62). Because the total population of China is
more than 600 million and is increasing at the net rate of about 15
million a year, the need for new jobs is growing at a faster pace
than the expanding supply of employment opportunities. Yet the
emphasis on modern industry in the first two Five Year Plans re-
quires only small amounts of additional labor relative to the level
of investment. During the Second Five Year Plan the total labor
force is expected to grow at least four times as fast as the planned
expansion of wage workers. Under present Chinese Communist policy,
which discourages self-employment in urban areas, most of those
entering the labor force will have to seek work in the rural areas,
where the intensive application of labor cannot profitably be pushed
much further.
Rapid socialization-in the rural areas has apparently reduced em-
ployment and output in subsidiary occupations, although recent policy
statements indicate a desire to reverse this trend. Up to the present,
however, efforts by the Chinese Communists to relieve chronic under-
employment in rural China have been only partially successful. In-
tensive-labor projects such as land reclamation, afforestation, and
water conservancy have used large numbers of rural labor with small
investment costs and are thus providing productive work for labor that
might otherwise be idle. Corvee and penal labor have been used for
these tasks throughout China and, in the case of corvee labor, have
made relatively efficient use of redundant labor at unusually low cost.
Industrial expansion in Communist Chiria, unlike the experience of
most other countries, has not required, although it has stimulated,
the movement of surplus farm labor into the cities. Even though
stringent measures have been taken to prohibit this movement, enough
peasants have evaded these controls to swell the urban population
greatly and thereby complicate the unemployment problem in the cities.
* The estimates and conclusions contained in this report represent
the best judgment of ORR as of 1 October 1957?
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Socialization of private businesses in the cities, along with
restrictions on self-employment, resulted in employment cutbacks in
commercial, handicraft, and service occupations. These cutbacks,
combined with the infiltration of destitute peasantry into the cities,
created a greater supply of labor than could be used in the expanding
urban centers of China. The result has been continuous unemployment
in urban areas since 1950.
In modern industry, underemployment, rather than unemployment,
has been the more serious problem. In spite of the growth of new
opportunities for employment in modern industry, there has been a
persistent tendency to hire more workers than are. justified by the
available production facilities. Economic enterprises have con-
sistently overestimated their need for labor, with the resultant over-
hiring boosting costs and holding down increases in productivity
throughout modern industry. The government's response to these con-
ditions has been a campaign of retrenchment aimed at reducing excessive
labor in industry. The degree of this overhiring is suggested by a
directive of the Ministry of Heavy Industry in 1955 ordering all enter-
prises under its control to cut back their personnel rolls by 15 to 20
percent. Any reductions achieved in 1955, however, were nullified by
reneged hiring in 1956, when employment expanded abruptly under the
stimulus of heavy investment in construction and industry. With wage
costs running higher in 1956 because of the newly instituted wage
reforms, the government has again insisted on more rational employment
practices and has demanded that total employment be cut back in 1957
and that wages be held down or reduced wherever possible.
By emphasizing modern, large-scale, capital-intensive plants,
Chinese Communist industrial planners are using the bulk of their
scarce capital in investments which make relatively little use of the
enormous supply of manpower. Furthermore, there is evidence that
greater total output as well as higher employment could be obtained by
the investment of the same amount of capital in small- and medium-size
plants. It is probable that recognition of these facts has prompted
the recent endorsement of subsidiary occupations in the rural areas
and of new investment in smaller industrial plants for the cities.
If Chinese Communist policy, however, continues to give highest pri-
ority to heavy industry, which is predominantly capital-intensive,
and continues to penalize private employment and to neglect consumer
goods industries, which are mainly labor-intensive, then it is doubt-
ful that the Chinese Communists will solve the problem of unemployment.
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I. Introduction.
The term unemployment has assumed, in most Western societies, a
relatively precise meaning which has little pertinence or applicability
to the Chinese Communist labor force. The absence of reliable manpower
statistics in Communist China and the apparent lack of any consistent
standard of determining employment status make it necessary to adapt
certain technical terms to fit into the unique context of China's pop-
ulation and manpower situation.
Although it is possible to differentiate between voluntary and
involuntary unemployment, only the latter has any great significance
in China. The voluntarily idle -- those who neither work nor seek
work -- are generally ineligible because of age, child-rearing duties,
or physical handicaps. The idle rich, or those who choose not to
work, are for all practical purposes nonexistent in China today. In
fact, those members of the wealthy class who remained in China after
1949 have been in most cases prohibited from seeking work. i* Un-
employment will therefore be used in this report only in the sense of
involuntary unemployment. This, in turn, may logically be subdivided
into several forms -- visible, seasonal, and disguised unemployment.
A. Visible Unemployment.
The most obvious form of unemployment, and consequently the
easiest to define, is the condition of complete joblessness for certain
workers for specific time periods. Although part of this condition may
be temporary, or frictional, unemployment, most of it is of a more
permanent nature, resulting from a faster rate of growth of population
than of job opportunities.
B. Seasonal Unemployment.
Agriculture suffers most from seasonal unemployment because
planting and harvesting are so dependent on climatic conditions. In
the south of China, this situation has been relieved somewhat by
double-cropping and interculture of plants, making it possible to
space demands for heavy labor more evenly throughout the year.
Handicraft and home industries have further served to fill the gaps
in agricultural work. Handicraft work may itself be seasonal, how-
ever, depending as it so often does on locally grown raw material or
on seasonal demand for products.
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C. Disguised Unemployment.
The disguised unemployed are those workers, usually in
agriculture, handicraft, or service functions, who are so numerous
in relation to the resources with which they work that, if some of
them were withdrawn from work, the total output of their particular
sector would not be diminished. J Because these workers may be
employed and working, at least part time, to call them disguised
unemployed is somewhat misleading. Underemployment is perhaps a
better term and will be used in this report as a synonym for dis-
guised unemployment.* Underemployment generally arises wherever the
existing labor force has insufficient resources with which to work.
In China, this condition is most apparent in agriculture, where the
shortage of arable land relative to farming population has made it
difficult either to utilize manpower fully or to raise productivity.
In such a situation, productivity can usually be raised only by the
application of technological improvements or additional investment.
Further additions of labor would only lower productivity. With a
stable technology and low investment in agriculture, limits of labor
intensification are reached in which the redundance of labor appears
not as visible unemployment but as chronic underemployment.
II. Unemployment in the Agricultural Sector.
A. Surplus Labor in Agriculture.
A high density of farming population, severely limited
resources of arable land, and the seasonal nature of the work all
contribute to unemployment in Chinese agriculture. Because of the
pressure of growing farm population on limited land resources, the
techniques of production in China have evolved in the direction of
more intensive application of labor. Although these intensive tech-
niques have made it possible for increasing numbers of farm workers
to find work on the land, this spreading of work faces a point of
declining returns in which further rises in labor supply will lower
*-As the reference is to an excess of workers for a particular task
or job, this condition might just as logically be termed overemployment.
Underemployment, however, is the more familiar term and is most common
in the literature on unemployment. Hidden unemployment and partial
unemployment are terms which also have been used to describe this
same condition.
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productivity and per capita income with only partial compensation
in increased production. At this point, new capital investment,
additional land, or new methods of cultivation are necessary if
production is to increase enough to use the growing labor supply
profitably. Nevertheless, because farm labor is so abundant and
therefore so cheap, it has generally been less costly to rely on
human labor than to invest in animal labor and machinery.
The timing of labor inputs tends to vary sharply through the
year as a result of the cyclical nature of agricultural production.
Periods of slackness in farm work alternate with periods of peak
labor demand -- notably during harvesting and sowing -- when there
are often temporary and local shortages of labor. Yet even these
temporary periods of relatively full employment have been marked
by inefficient use of manpower resources. J.L. Buck, in his rural
surveys of 1929-33, 3 found that only 35 percent of his sample of
able-bodied men (15 to 60 years of age) worked full time; the re-
mainder worked either part time or not at all. Idleness averaged
1.7 months per able-bodied man per year. / Most of this idle time
was in the winter months and includes all those who could not find
subsidiary work to tide them over the agricultural slack season.
Underemployment, or the underutilization of labor, is only
partly covered by the seasonal unemployment indicated above. Al-
though most qualified observers believe that chronic underemployment
has persisted in rural China for generations, very little statistical
evidence is available for documenting or quantifying this view. There
is, in fact, no simple technique for measuring the degree of surplus
labor on the land. Labor is considered here to be redundant or
surplus to the degree that workers could be withdrawn without reducing
the level of output.* It is not known whether the Chinese Communists
* By using this general standard, estimates have been made for Eastern
Europe which indicate that, in 1939, one-quarter to one-third of the
farm population was surplus, varying from 33 percent for Yugoslavia and
Bulgaria to about 25 percent for Poland and Greece, about 20 percent
for Rumania, 15 percent for Hungary, and about 10 percent for Czecho-
slovakia. J In prewar Egypt, one observer stated that with better
farm management "one might envisage with fair assurance the reduction
of the agricultural population by at least 50 percent without reducing
the total products from the land and without much more mechanization
than at present." J
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would define surplus manpower in the same way. They have used the
term, however, in reporting on a survey in 1955 of farm cooperatives.
According to this source, surplus manpower totaled 26 percent of
the labor force in selected cooperatives of Hopeh Province, 30 per-
cent in cooperatives of Shansi Province, 17 percent in cooperatives
of Kiangsu Province, and 35 percent in cooperatives of Szechwan
Province.
B. Rural Labor Policies Under the Communists.
Since the Communists assumed control in 1949, little infor-
mation on rural underemployment has been released except in indirect
references. The agrarian policies of the Chinese Communists indicate,
however, an awareness of the problem and an intention to obtain more
efficient use of the enormous rural labor supply. Given a situation
in which the rural labor force contains a high proportion of redundant
labor, several alternatives for ameliorative action are possible.
The most obvious remedy for rural underemployment is the creation of
new employment opportunities, preferably off the land and in manu-
facturing industries, under conditions of rapid economic development.
Assuming that this more or less ideal solution cannot be achieved
rapidly enough, then the alternatives are to raise output and hence
employment by heavier investment in agricultural production, more
efficient organization of production activities, redistribution of
labor from areas of dense concentrations to areas of virgin or re-
claimed land, or, finally, by using the surplus labor to create
capital improvements on the land at minimal investment cost. The
Chinese Communists are in fact applying all of these latter methods
in varying degrees. Investment in fertilization, better equipment,
and better seeds, although of fundamental importance in raising
agricultural productivity, will not be discussed in the following
sections, because of the indirect relationship to labor and under-
employment.
1. Collectivizing the Peasantry.
Collectivization of the Chinese peasants has reordered the
production relationships on the land and may result in a further in-
tensification of labor inputs. Regulations for higher state agricul-
tural producer cooperatives, passed by the National Peoples Congress
in June 1956, require a higher degree of specialization and a more
elaborate division of labor than was previously the rule among farm
laborers. ? In addition, work quotas are combined with production
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goals in an effort to obtain the highest possible output from in-
tensive-labor application. Emulation drives are to be organized in
the cooperatives to speed up work, presumably in much the same way
that they have been used on factory production lines. Workers are
subject to labor disciplinary rules, infractions of which are pun-
ishable by reduction in pay, fines, dismissal from one's position,
and, finally, expulsion from the cooperative. A more efficient
organization of farm labor, probably even more than the speedup of
work operations, should account for some increase in agricultural
output, but, to the degree that greater efficiency is achieved in
already highly intensive labor practices, it is logical to expect
an increasing amount of labor to become available for other work.
It is obvious, in fact, that the Chinese Communists do not expect
more intensive use of farm labor to reduce materially the amount of
surplus labor. One of the best indications of this fact can be
found in the stress now laid on projects which require large numbers
of farm labor but which are not directly involved in crop production.
2. Mass-Labor Projects.
The Chinese Communists plan to channel large numbers of
the surplus rural population into construction projects which can
use masses of unskilled labor without at the same time requiring
large investments in capital equipment. Surplus labor from the
farms can be used to advantage on water-conservation projects, road
building, land reclamation, afforestation, and similar tasks re-
quiring relatively small capital inputs. Far from being make-work,
these tasks are in the long run essential to raising agricultural
production and thus are significant contributions to the national
output. The cost for these projects is composed largely of expenses
for labor, which in most cases are little more than subsistence for
the workers.
The scope of construction projects undertaken since 1950
demonstrates clearly that the Communist officials experienced no
difficulties in obtaining sufficient numbers of unskilled, surplus
laborers for their needs. In water conservancy, for instance, the
1.7 billion cubic meters of earthwork completed in 1950-52 required
the effort of 20 million workers. 9 There has been no indication
that the government met any unusual problems in collecting the
workers required for construction on this scale. This is, in fact,
not unusual considering the source of labor used on these projects.
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a. Corvee Labor.
Corvee labor refers to unpaid or partly paid labor
exacted by public authorities. This levy on labor is traditional
to China and most of the Far East, where it has generally been
accepted as simply another form of taxation. This system was used
most often in agricultural slack seasons for the construction, re-
pair, or maintenance of public works such as roads, irrigation canals,
and dikes. The Communists have expanded this usage, lengthened the
period of service, and made it impossible for the draftee to hire a
substitute. Having thus strengthened the system for their own uses,
the authorities now have a highly effective means of utilizing the
masses of seasonally unemployed and chronically underemployed. Costs
for corve'e labor have varied widely. In some cases, workers have re-
ceived no pay and have had to furnish their own food, / in other
cases food was provided, and in some cases wages were paid. 11 The
corvee system has worked well under the stress of natural calamities,
notably during floods, when enormous supplies of labor were needed
for strengthening the dikes and for other flood-control measures.
Following the disastrous floods in 1954, for example, dike repairs
alone required 5 million to 6 million workers over a 3-month period. 12/
These workers were drawn from the flood-affected areas and were paid
for work instead of relief, a common practice now for all disaster
victims.
b. Forced Labor.
Forced labor, or penal labor (which the Communists
prefer to call labor reform), has been used in factory work, agri-
cultural production, and construction work. The diversity of uses
for this type of labor is a function of its complete control by the
authorities. Forced labor has more mobility than corvee labor, which
is almost always recruited in the local area of the project. No
evidence is available for cost comparisons of penal and corvee labor,
although it seems likely that the cost of feeding, housing, and
guarding the forced labor would result in a higher cost per person
than would be the case with corvee labor, which presents no housing
or security problem.
The Communists announced in 1954 that more than 83
percent of the prison population were engaged in production, 13 and
subsequent indications are that the current participation rate is
probably higher. Lacking even the most rudimentary statistics on the
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number of prisoners in China, estimates on the size of forced labor
camps have varied widely. The size of the penal labor force has been
augmented by each major "campaign" in Communist China -- land reform,
"three-anti" and "five-anti" campaigns, roundups of counter-revolution-
aries -- all of which sent hundreds of thousands, if not millions, of
political and class enemies into detention. When, in addition, the
common criminals and other "undesirables left over from the old society"
are considered, it seems likely that the total number of convicts must
run into the millions. If they had not been placed under detention,
most of these individuals would be unemployed today, because the Com-
munist regime has consistently sought to eliminate its political enemies
by wiping out their means of economic support, including the right to
seek employment.
3. Subsidiary Occupations.
Rural subsidiary occupations, mainly in handicraft and
commerce, were almost completely neglected in the rapid socialization
of agriculture, 14 with consequent declines in employment, production,
and income. This loss to the economy has not been balanced by the in-
creased availability of labor for agricultural production. In order
to use this labor more profitably, the Chinese planners are now at-
tempting to redress their neglect of the subsidiary occupations. A
recent directive on agricultural cooperatives, J for example, has
ordered that subsidiary production be revived by organizing "side-line
production teams" made up of former part-time handicraft workers. If
the agricultural cooperative "does not possess the requirements for
engaging in such side-line production, it may let Lthe worker) run
their own business at their own profit or loss." 6 By allowing
greater freedom in part-time handicraft, commercial, and service occu-
pations, a considerable gain in employment might be made in the rural
areas. At the same time, the income of the peasants could be supple-
mented and larger amounts of consumer goods could be produced, which
would contribute to relieving two important sources of rural discontent.
III. Unemployment in the Nonagricultural Sector.
The First Five Year Plan (1953-57) of Communist China, unlike the
industrialization efforts of most other countries, has not yet required
a large-scale movement of surplus farm labor into the cities. On the
contrary, stringent measures have been taken to prohibit this movement,
and in a number of cases, surplus labor has been moved out of industrial
cities and returned to rural areas. In spite of these controls, however,
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urban population in China has grown rapidly since 1950. Net growth of
employment opportunities, on the other hand, has undergone a slower rate
of growth, so that the urban supply of labor has probably exceeded the
number of available jobs consistently since 1950. The resulting degree
of unemployment and underemployment has never been subjected to careful
measurement. Communist admissions of unemployment, ranging between 2
million and 3 million people, are believed to be underestimates of the
actual situation. If these estimates are actually based on unemployment
registration data, as sometimes alleged, the incomplete nature of the
registration statistics* would account for the apparent underestimate.
In general, however, published statements on unemployment and surplus
labor are marked by the absence of any attempt at quantification. It is
possible, nevertheless, to make rough assumptions of the degree of un-
employment by reference to changes in urban population. As the Chinese
have acknowledged jobs to be the fundamental determinant of the popula-
tion capacity of cities, / their attempt to control the size of urban
centers has been one of the most pertinent indicators of employment oppor-
tunities in those areas.
A. Growth of Urban Population, 1950-57-
According to Mao Tse-tung, "if China is to build huge people's
industries and many large, modern cities, she must go through a long
process of converting rural population into urban population." 19/
This seeming truism, supported by evidence from almost every in-
dustrialized society, may have to be amended for China, because no
precedent exists for a nation attempting rapid industrialization
with comparable demographic problems. Certainly the process of urban-
ization in China will be affected not only by future industrial develop-
ment but also by the demographic base upon which these changes must occur.
The rural-urban distribution of China's population in 1953 --
announced as 13.3 percent urban and 86.7 percent rural -- suggests the
rural, agrarian nature of the society. In the highly industrialized
us, 61. percent of the population were classified as urban in 1950. 20
In terms of absolute numbers, however, this difference is less extreme;
the US classified 96.5 million people as urban in 1950, and China --
undoubtedly using a less inclusive definition -- listed 77.3 million
as urban in 1953. By 1956, Communist China was estimating the urban
* Not only were part of the unemployed forbidden to register, 17 but
many of those eligible to register failed to do so because of the
explicit compulsion to take whatever work might be offered.
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population as 90 million people, 21 17 million less than the US urban
population for the same year and 3 million more than the Soviet urban
population, also for 1956. 22 The skills, education, and productivity
of the above urban populations remain, of course, the most significant
economic factors, but the comparison in terms of quantitative size is
relevant to availability of labor supply and suggests important differ-
ences between recruitment of industrial workers in the US and the USSR
on the one hand and in China on the other.
Official Chinese Communist announcements have indicated a
growth in urban population of the following order: 1950, 58 million
people; 1953, 77 million people; and 1956, 90 million people. The
claimed increase of 33 percent from 1950 to 1953 is believed to be
overstated because of the inaccuracy of precensus estimates, almost
all of which were too low. Also the expansion of urban boundaries has
added large numbers previously defined as rural inhabitants. The in-
crease from 1953 to 1956,? approximately 17 percent, is considered
more reliable, although it too contains rural inhabitants reclassified
by the enlargement of urban boundaries. The official estimate of urban
population growth over the First Five Year Plan is apparently 33 per-
cent, 23 which would represent an average annual gain of 5 million
people, resulting in an urban population for mid-1957 of about 95
million people.
1. Migration to the Cities.
Before the Communist takeover, migration of peasants into
the cities traditionally reached its annual peak during spring, when
winter food stocks ran low, and was generally followed by a sub-
stantial backflow as soon as conditions in the rural areas returned to
normal. After 1950 the increment remaining in the cities became larger,
presumably because of the preferential treatment accorded urban workers
by the government. By 1953, extensive propaganda was ordered to inform
the peasants that "industrial construction is only in the beginning
stages in the cities and does not require additional workers." 24+
In addition, directives were issued forbidding the unauthorized movement
of peasants into urban areas. 25 These controls were subsequently
supplemented by "spring famine relief work" for the express purpose of
supplying peasants in food-short areas with sufficient supplies "so
that they will not run away from their homes to escape famine." 26
In spite of these increasingly efficient techniques of
control, it is estimated that 10 million to 12 million peasants moved
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to cities between 1953 and 1957, which, together with the estimated
6 million people added by natural increase, combined to swell the
urban population of China to between 95 million and 100 million.
That urban population could grow so rapidly by migration -- in spite
of the laws against peasant movement -- is a reflection not so much
of weakness in control as of the volume of surplus labor on the land
and the pervasive pressure which this exerts against the cities.
2. Evacuation of Surplus Urban Population.
The steady infiltration of peasant migrants into the cities
led the Communist government in 1955 to attempt an evacuation of that
portion of the urban population considered to be surplus. Although the
authorities had been moving relatively large numbers of skilled workers
and technicians out of coastal cities to the Northeast and Northwest,
they had attempted no large-scale displacement of urban population
before 1955?
Shanghai is perhaps the best example of this attempt at
resettlement. As one of the most overpopulated cities in China, it
has thus far received the most attention from the Communists. With a
population of 5 million people in 1950, Shanghai grew to 6.2 million
in 1953 and 7 million in 1955. P11 The excess of births over deaths
between 1950 and 1955 would account for an estimated addition of
600,000 to the population, but the remainder of the increase -- 1.4
million people -- represents the flow of migrants into Shanghai,
mainly from rural areas. 28 According to a Communist newspaper,
in 1955 only 2,570,000 people were actually "participating in production"
in Shanghai, leaving the remaining 4,430,000 "jobless." If the esti-
mated number of dependents and others not seeking employment are sub-
tracted from this figure, approximately 1.4 million people in Shanghai
appear to have been unemployed in 1955, exactly matching the 1950-55
increase of the population attributable to in-migration. '
The official plan was to evacuate 1 million of these
unemployed migrants during 1955, but because of the resistance of the
evacuees and the adverse reaction of the local peasantry, who had to
share their limited supplies of food and land, 30 the program was
abandoned when less than 600,000 persons had been sent back to the
rural areas. 31
In a recent policy statement the Shanghai Municipal Peoples
Council formulated the following measures for eliminating the continuing
"state of overpopulation in the city" 32/:
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a. The unemployed must be "mobilized" for return to the
countryside for agricultural production.
b. "No added workers will be enlisted for the city as a
whole (in 1957), and where some factories and enterprises must have
more workers, adjustment should be made by drawing from workers al-
ready employed in the city."
c. "Families of workers now living in the rural areas or
other cities must be encouraged to remain where they are."
d. Census regulations must be firmly enforced in order
to keep the records accurate and up-to-date.
Although it received the greatest amount of publicity,
Shanghai was by no means the only city attempting to reduce its
surplus population by forced return to rural areas. Canton, Tientsin,
Amoy, Tsingtao, Fu-chou, Wu-chou, Harbin, Mukden, An-shan, and Lu-ta
have all been cited 33-1 as cities from which rural migrants were
removed. It is noteworthy that several of the heavy industry cities
of the Northeast are included in this list, indicating that problems
of labor oversupply are not limited to the predominantly commercial or
light industry cities.
Official explanations of this population dispersal have
tended to stress that the peasant influx not only has compounded the
difficulties of food supply and employment in the cities but also
has adversely affected agricultural production through loss of labor
power on the land. It is doubtful, however, that loss of unskilled
labor power would be a serious problem for agricultural production.
Probably the only serious drain on rural manpower has been the re-
ported loss of members of the managerial and administrative class --
directors of agricultural cooperatives, administrative cadres, school
teachers, militia chiefs, and timekeepers 34 -- most of whom are
difficult to replace.
B. Employment in Commercial, Handicraft, and Service Occupations.
The expansion and contraction of employment in commercial,
handicraft, and service occupations have been a function of the rural-
urban migration pattern and the government's policy toward the non-
socialized sector of the economy. Both these factors have contributed,
at least since 1950, to creating difficult employment problems for the
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tertiary occupations. The influx of rural migrants into these oc-
cupations after 1950 added to the pre-existing condition of under-
employment. These problems subsequently became worse when the
government's campaign against private business caused a sharp re-
duction in job opportunities in the commercial and service fields.
The proportion of urban manpower in commercial, handi-
craft, and service occupations has been high in China because rural
migrants, having limited skills and resources, crowded into these
expansible and undemanding jobs. These occupations, characterized
by low earnings, low productivity, and intense competition, suffer
further from a surplus of labor. 3.1/ In this case the size of the
labor force in tertiary occupations is an indication of lack of
alternative employment rather than a sign of economic progress, as
is generally conceded to be the case in more advanced economies.
The increased volume of rural migration to cities, which
occurred after 1950, resulted in rapid expansion of tertiary oc-
cupations. Commercial occupations, the only category for which there
are reasonable figures, grew from 7 million jobs in 1950 to 8 .million
in 1952 (see Table 1*). 36 This growth was presumably caused by a
shift of peasants from agricultural work into small-scale commercial
activities, mostly as self-employed peddlers or hawkers. Although
socialization in commerce had covered 1.2 million workers by 1952,
the private sector was at a higher employment level than in 1950.
With a step-up in the rate of socialization and the government's 1952
campaign against private business, employment in private commerce fell
off from 6.8 million workers in 1952 to 3.6 million in 1955. At the
same time, employment in socialized commercial organizations doubled.
The net effect, however, was a decline of 24 percent in the total
commercial employment between 1952 and 1955, forcing approximately
2 million workers to seek new work. This decline was common to both
rural and urban areas. In Honan Province, for instance, the number of
persons in commerce represented 1.19 percent of the total population
of that province in 1952 and 0.97 percent in 1954, but only 0.73 per-
cent by February 1956. 37 In spite of such drastic reductions in the
number of personnel engaged in commerce, the Communists have claimed
that the rise in labor efficiency has been so great that the net volume
of retail sales by all commercial organizations in 1955 increased 170
percent above that in 1950. 38
* Table 1 follows on p. 15.
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Commercial Workers in Socialized
and Private Employment in Communist China a/
1950,
1952, and 1955
Type of Employment
1950
1952
1955
Socialized
382,000
1,246,000
2,490,000
Private
6,620,000
6,768,000
3,642,000
Total
7,002,000
8,014,000
6,132,000
a.
Although efficiency has probably increased, the sharp decline
in commercial jobs has harmed retail services. By 1956, in fact, the
government was seeking to stop the steady shift of commercial workers
out of retailing into agricultural work, as shown in the following
quotation:
The current trend of business personnel changes
from business occupations to agricultural occupations
should be discouraged. The number of business personnel
is not too large in the nation. In fact, there is a
shortage of business personnel in some localities. It
has been discovered that some 40 percent of the private
business personnel and peddlers have entered agricultural
occupations in certain localities. This trend not only
inconveniences the consumers but impedes the flow of
commodities. To correct this situation, propaganda ed-
ucation should be strengthened so that business per-
sonnel will not blindly plunge into agricultural oc-
cupations. 40
C. Surplus Labor in Modern Industry.
Underemployment of labor, rather than unemployment, has been
the more serious problem in modern industry. Having grown from about
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3 million workers in 1950 to an estimated 7.5 million in 1957, the
labor force of modern industry has apparently overexpanded, with the
result that large numbers of workers are surplus while at the same
time receiving relatively high wages. Even in heavy industry, which
has been consistently favored by investment funds, the expansion of
production facilities has failed to utilize fully the employed labor
force.
Between 1950 and 1954, labor productivity increased at a slower
rate than employment in enterprises under the Ministry of Heavy Industry.
This lag in productivity was attributed to "labor waste" which followed
overexpansion in employment. This growth in employment has been more
pronounced among administrative and service personnel -- called "nonindus-
trial" or "nonproduction" workers by the Chinese -- than among production
workers. The latter grew by 96 percent between 1950 and 1954, whereas the
administrative and service workers increased by 173 percent. 42 This dis-
proportionate rate of growth has been cited as the prime cause for the
poor showing in productivity, as evidenced in the following quotations 43 :
In the last several years, the excessive number
of employees in enterprises has had a bad effect on
the increase of labor productivity in these enter-
prises. In particular, the overemployment of per-
sonnel in administrative departments and of nonin-
dustrial personnel has caused the labor productivity
of the whole personnel force to lag far behind the
labor productivity of production workers. For example,
in 1954, labor productivity for the total personnel
force in building construction and installation enter-
prises under the Ministry of Heavy Industry was only
56.5 percent of the productivity of production workers
in these enterprises. In the first quarter of this
year L1:_1L95 7, the number of workers in half of the pro-
ductive plants and mines under the Ministry of Heavy
Industry exceeded the plan figure. If these plants
and mines had been able to restrict their personnel
to the plan number, then they could have raised the
labor productivity of workers for the first quarter
of this year 3.2 percent above that of the same
period of last year. 44
Personnel waste is also widespread and serious.
Confused administrative structures and excesses of
personnel in supporting departments occur in all
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enterprises. The number of employees in an enter-
prise just beginning operations invariably exceeds
the norm prescribed in Soviet Union designs. For
example, employment at Plant 301 was more than 100
percent above norm, while it was 60 or 70 percent
above norm at the An-shan Iron and Steel Company's
large-scale rolling mill and seamless steel tube
plant. In many enterprises, labor productivity
has been extraordinarily low, and the loss of work-
days has been very high. In the case of miners in
the mines, the actual working time consumed less
than one-third of the shift each day. In compar-
ison with the labor productivity in factories and
mines of similar nature in the Soviet Union and in
the new democracies, productivity in many of China's
enterprises is from 50 to 100 or 200 percent lower.
This clearly shows the personnel waste and low labor
productivity in China. J
The government's response to these conditions has been an
official' campaign of retrenchment. Beginning in 1955 and again in
1957, official policy has endorsed reductions in force for those de-
partments with surplus manpower. Although the retrenchment campaign
has hit hardest at the governmental bureaucracy, it has also singled
out many industrial plants for criticism. The Ministry of Heavy In-
dustry, for instance, issued a directive in 1955 that all enterprises
under its control should cut back their personnel rolls selectively
15 to 20 percent. In addition, all enterprises were to dispose of
their surplus personnel as expeditiously as possible rather than re-
taining them in pools for possible future use. As a result of these
orders, the Ministry of Heavy Industry reported that 7 large plants --
the Shih-ching-shan Iron and Steel Plant, the An-shan Iron and Steel
Company, the T'ung-kuan-shan Bureau of Mining Affairs, the Liu-li Ho
Cement Plant, Cement Plant No. 7, the Tang-ku Plant of the Yung-li
Chemical Company, and the Main Nan-fen Plant in Pen-ch'i -- succeeded
in reducing their personnel rosters by an average of 19.4 percent. 47
Any reductions in force achieved in 1955 were probably nullified
in 1956, when 2.8 million new wage earners were added to the national
economy. / This has resulted in charges that the labor plan in 1956
was too loose and that the number of personnel was "overly increased." X71
Chinese authorities have ordered that in 1957 industrial enterprises are
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to work out their labor plans so that no new workers are hired and the
number of administrative personnel and temporary workers is reduced --
all this "in order to achieve the targets of increasing production,
reducing costs, and raising labor productivity." 50
The overhired condition of the industrial labor force is re-
flected also in the decision to withhold trained apprentices from
employment. At the end of 1956, there were 370,000 apprentices in
training, most of whom were scheduled to become journeymen and enter
production in 1957. 51 Instead of entering the labor force, these
apprentices are to be kept in training until a demand for their service
develops. The following official explanation of this situation is be-
lieved to be accurate and realistic:
The need for new workers actually required this
year L1957T has been considerably reduced. Some
departments even have a surplus from their original
working force and do not need additional personnel.
Under such circumstances, if the 370,000 apprentices
were promoted to journeymen according to the original
plan this year, the state would have to pay many un-
necessary wages. Increased expenditures would un-
favorably affect construction contracts, the balance
in financial income, and the stabilization of commod-
ity prices, and would be detrimental to the long-term
interests of the state and the people. 52
The relationships between wages and unemployment have not been
explored by economic planners in China, presumably because of the re-
luctance to acknowledge the existence of unemployment. According to
the Chinese Communists, wages are to be raised only as productivity is
increased, and, as a general rule, wages should increase at only half
the rate of productivity. 53 The possibility of wages responding to
the supply and demand for labor has apparently received no comment in
Chinese journals. Under the conditions of underutilization of labor
which were described previously for modern industry, it would be logical
in a relatively free economy to expect some decline in average wages
when the labor supply exceeds the demand. In the controlled economy of
the Chinese Communists, on the other hand, wages should be mechanically
adjusted to changes in labor productivity. For the years 1953, 1954,
and 1955, however, it appears that wages, rather than being controlled
by administrative fiat, actually followed fluctuations in the supply
and demand for labor. As shown in the following tabulation, 54 the
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trend of wages among workers and employees was certainly not attuned
to changes in labor productivity:
Increase in Labor
Productivity Increase in Wages
(Percent) (Percent)
1953
13
5.0
1954
15
2.6
1955
10
0.6
The slump in wage increases for these years, culminating in
actual wage decreases in 1955, apparently resulted from economiz-
ing moves which concentrated heavily on labor, the only productive
factor that China has in surplus quantities. The primary aim was
to cut wage costs by eliminating redundant labor and by trimming
wages. Reducing surplus labor was strongly advocated but rarely
implemented. Average wages, however, were held back by eliminating
year-end and incentive bonuses, reducing piecework, and delaying
promotions. 511 As a result of these actions, average wages in
heavy industry, to cite one example, declined 1.75 percent between
1954 and 1955. 56 In addition to this fall in average wages, the
total amount of wages paid failed to fulfill the plan figure for
1955 in spite of a rise of 14.2 percent in labor productivity over
the same period. Similarly, the Iron and Steel Industry Control
Bureau, although achieving its goals for production and produc-
tivity, had to admit that 84 percent of the enterprises under
its, control failed to utilize fully their wage funds according to
plan in 1955. 57 The average wage per employee was only 95.24
percent of the plan figure, a drop of 0.6 percent from the same
period in 1954.
Thus far the Chinese Communists have chosen to ignore the
relationship between wages and labor supply discussed above. This
choice cost them heavily in the wage reform of 1956, when, apparently
endeavoring to bolster incentives, the authorities raised wages an
average of 14 percent for all government enterprises. 58 The net
result, given existing unemployment and redundant labor, has been an
increase in costs, which in turn is reducing profits 5.2/ with no
compensating rise in productivity. With the increases in wage funds
encouraging job seekers and contributing to further expansion of
employment, the number of workers added in 1956 has been called "ex-
cessive," and, as a result, prodictivity is expected to be adversely
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affected throughout 1957. 60 Consequently, orders have been given
that wages are not be raised in 1957, that no promotions are to be
given, and that no personnel are to be added except under strict
control. 61/
IV. Official Policy Toward Unemployment.
Official Chinese Communist statements on unemployment have been
marked by vacillation and equivocation. Spokesmen for the government
have successively ignored, minimized, and given great significance to
the problem of unemployment, with perhaps the dominant attitude being
one of patient faith in the promised efficacy of socialist solutions.
These fluctuations in official attitudes have been reflected in policy
changes which also show a considerable variation in range and objective.
Recent developments, however, have shown more flexibility in action,
indicating that the Chinese Communists, instead of accepting the doc-
trinaire position that unemployment cannot exist in a socialist state,
are realistically accepting unemployment as one of the "contradictions"
which will require much time and effort to solve.
By 1952, after only 3 years of control in China, the Communists
claimed considerable success in reducing the unemployment "left over
by the old society." By retaining most of the governmental and
educational personnel who had worked under the Nationalists and rein-
stating factory and mine workers wherever possible, the Communists
claimed to have greatly alleviated problems of unemployment in China. 62/
According to the Communists, employment was high in 1952, and those
unable to obtain jobs were largely ex-Kuomintang officials and army
officers, landlords, and unreconstructed intellectuals. These groups
would be integrated into the labor force as soon as their thoughts were
reoriented. Underemployment was recognized as a problem in 1952, but
only a temporary one. Surplus workers were to be retained by all public
and private enterprises and were to undergo training until needed. The
rural surplus labor, according to these same theorists, should be moved
to the northeast, northwest, and southwest in order to open up barren
land for agricultural production. 2X /
The simplicity of these plans of 1952 reflects the optimism charac-
teristic of labor policy in the first 3 or 4 years of the Chinese Com-
munist government. Even though the Communists acknowledged that the
economic and social reform of business, as well as ;and reform, would
create additional unemployment in the cities, the authorities assumed
that "large-scale national construction" would insure full utilization
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of surplus labor in both the urban and the rural areas within a
relatively short time. L4J This condition had not been achieved by
1956, however, and official policy consequently began to shift on a
number of points.
Article 39 of the Draft 12-Year National Program for Agriculture
states that unemployment in the cities will be settled in 5 or 7
years from the beginning of 1956. 65/ Not only does this statement
acknowledge that unemployment is a long-term, continuing problem, but
also it indicates that agriculture is expected to absorb much of the
surplus labor of China. Evidence of this expectation is found in the
evacuation programs which attempted to return surplus urban population
to rural areas. In this respect, there has been a persistent belief
that agriculture, primarily through reclamation and exploitation of
marginal land, could maintain even greater densities of population on
the land than is presently the case. Socialization of agriculture is
also expected to facilitate the expansion of the rural labor force.
The following statement, from an official Chinese news service, is a
typical example of this somewhat naive faith in reclamation:
The work of reclaiming wasteland is an easy way
to increase agricultural production. There is much
wasteland in China which has never been reclaimed.
Therefore, wasteland-reclamation work will undoubtedly
offer a good opportunity for fully utilizing the sur-
plus labor force of our country. In addition, it is
also necessary to have a large number of the unemployed
personnel in urban areas participate in agricultural
production work in rural areas. In Peking, Shanghai,
and the Dairen - Port Arthur areas, many unemployed
personnel and surplus labor forces have left for rural
areas to take part in agricultural production. 66
The lack of success in the evacuation of surplus urban population,
as mentioned before, has forced the Chinese Communists to reconsider
their entire plan for moving excess labor to the fringes of productive
land. Significantly, no migration program was scheduled for 1957, al-
though movements of excess population from cities have continued. Instead
the entire effort was to have been spent on consolidating the 1956 work --
when 430,000 people 67/ were involved in interprovincial moves -- and
preparing for the 195 program. 6/ This fact suggests that the Chinese
Communists now recognize that migration of surplus labor into relatively
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nonproductive areas is no panacea for employment problems, especially
when the cost in scarce capital investment funds is realistically
considered.
Another significant policy shift has been made in the case of
working women. Although women have always assisted in varying degrees
in farm labor and handicraft work, the Communists encouraged them to
enter industrial occupations where women had not been represented pre-
viously. Women wage workers, under this impetus, increased to approx-
imately 3 million in 1956, 69 more than 12 percent of the total number
of wage earners. Recently, however, this policy has been reversed.
Now women are encouraged "to restrict themselves to their domestic work
in the family" in an attempt to convince them that they are "making
great contributions to society if they do their part in educating their
children and take care of their husbands." 70
Having thus complicated the problem of employment by increasing
the number of competitors for the relatively scarce wage-paying jobs,
the Chinese Communists are now attempting to work themselves out of
this self-imposed problem. The USSR faced a similar paradox on the
eve of World War II when the Soviet government was encouraging house-
wives to enter the labor force in as large numbers as possible while
at the same time acknowledging a surplus of 5 million unused people in
the agricultural labor force. 1_1 In both the USSR and China the re-
sponse of housewives to the government's call was impressive, although
the prime reasons, in both cases, seem to have been the need to con-
tribute to the earnings of the husband -- which were insufficient for
the family budget -- and the expansion of child-care facilities. The
solution to this problem in the USSR grew out of the enormous loss of
population in World War II and the subsequent growth of nonagricultural
jobs. Because underemployment is far more drastic in China, and because
there is no basis for predicting a major drop in size of the population,
and, finally, because nonagricultural employment is scheduled to grow
slowly through the Second Five Year Plan, the present Chinese Communist
policy of discouraging the entrance of women into the labor force seems
to be the only practical alternative.
In a further effort to slow the growth of nonagricultural labor,
the Chinese Communists are seeking to divert graduating students and
apprentices away from the industrial labor force. Recent policy
advocates that "those students who are unable to continue further
studies should be mobilized to take part in agricultural production
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if their families are in rural areas. As for those whose families are
in cities, we should encourage them to take up apprenticeship at the
public service enterprises and to prepare themselves for seeking em-
ployment or further schooling in the future." 1.`l In addition, it has
been suggested that students who cannot continue their formal education
would get "state assistance to set up groups to assist one another to
continue their studies and to learn trades." 73
As indicated above, Chinese Communist policy on unemployment has
tended to shift between a "soft line" and a "hard line." The "soft
line" has encouraged economic enterprises to retain surplus personnel
and train them for future opportunities. This soft approach has also
encouraged payment of direct relief to the unemployed and subsidization
of training programs for the jobless. The "hard line," on the other
hand, has specified that surplus labor be dismissed with no suggestion
of training opportunities or relief measures. This approach has also
advocated that the government should make the unemployed find work by
their own efforts without the assistance of the state. As yet no
single line of policy has been consistently supported by the government.
Most recently the tendency has been to stress the difficulties of the
employment situation and to argue, as did a survey team investigating
unemployment in Peking, that those who are unemployed do not really
need to work anyway:
The survey team.was of the opinion that ours is a
populous country; at the present time it is also a country
with a backward economy and low production. To provide
employment for all would involve considerable difficulties.
As long as some member of a family is employed and the
livelihood of the family can be maintained, it should not
be necessary for the state to provide employment.
During the survey the team also discovered that the
development of diverse types of secondary and handi-
craft production would not only help the unemployed ease
their livelihood difficulties to a certain extent, but
would also be helpful to the general public. 74
As yet there has been no consistent policy of creating jobs simply
to keep people occupied. Work-relief has been used for disaster victims
in rural areas instead of direct relief, and trainees have had their
apprenticeship period extended, but keeping surplus labor on the payroll
merely in order to keep them off unemployment rosters has been strongly
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discouraged. Practices of paternalism and nepotism, which formerly
flourished in China, have been drastically cut by the Chinese Communists.
Raising productivity, at least in official policy statements, is always
more important than keeping the labor force employed. This goal, how-
ever, has not always been achieved. In 1956, for example, rapid expan-
sion of wage and salary workers caused a drop in the growth of labor
productivity through the first three quarters of 1956, 7J when twice
as many new employees were being added as called for in the plans of
that year. 76 This upsurge in employment not only exceeded the needs
for 1956 but also "surpassed the actual needs for 1957," according to
the National Conference on Labor Assignment, which met in Peking during
April 1957. 77 This admission of overexpansion in 1956 and readjustment
in 1957 is not. unique to the labor field but has generally characterized
the national economy of Communist China in 1956 and 1957. Labor avail-
ability, however, will become increasingly abundant in future years as
the rate of population growth increases. Productively employing this
population increase, with the limited investment sources available, is
steadily being recognized by Chinese Communist planners as the heart of
their problem, for which no easy solutions are in prospect.
V. Prospects.
Immediate prospects are for continued unemployment in Communist
China. The First and Second Five Year Plans, running through 1962, do
not provide for sufficient new jobs to ease greatly the present con-
dition of underemployment and unemployment. With entrants into the
labor force outnumbering the new jobs in industry and construction, the
excess of job seekers will have to be accommodated in agriculture, which
is already burdened with more abundant labor power than it can effi-
ciently use. Because the stress of the First Five Year Plan has been
largely on capital-intensive projects, however, the relatively modest
demands for labor are expected to make little inroads on the millions
of rural workers now underutilized by inefficient techniques and in-
adequate capitalization. Long-range prospects for employment are
dependent not only on how rapidly industrialization can be pushed but
also on how rapidly the population will grow. If the net annual growth
of the Chinese population is now about 15 million people, as the Chinese
Communists claim, then problems of employment can be expected to
persist, even with steady progress toward industrialization.
In spite of conflicting announcements on the level of employment
in China, there seems to be general agreement that the number of
workers added in 1956 was excessive and that considerable retrenchment
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will be required in 1957. Although the State Statistical Bureau 72
and the State Economic Commission 8/ have not used the same figures,
they both have put the number of wage workers at between 24 million
and 25 million people at the end of 1956. According to the State
Economic Commission, more than 1 million workers were employed during
the fourth quarter of 1956, of whom more than 50 percent were on a
temporary or seasonal basis. During 1957, therefore, a reduction of
approximately 140,000 workers is planned in the total number of wage
workers in the state plan,* given as 22,400,000 in 1956 and estimated
at 22,262,000 by the end of 1957. 82
What is not acknowledged is that the First Five Year Plan called
for an increase of workers and staff (including both public and private
employment) from 21 million in 1952 to 25.2 million in 1957. At the
end of 1956, according to the State Economic Commission, there were
24.17 million workers and staff members, of whom 22.4 million were under
the state plan and 1.77 million still outside of the socialized economy.
If a reduction of 140,000 workers is planned for 1957, then the number of
wage workers should total about 24 million at the end of 1957, or 1.2
million workers fewer than specified in the First Five Year Plan.
It should be noted that the employment goals of the Five Year Plans,
unlike the production goals, have not been targets to surpass or over-
fulfill. On the contrary, every indication suggests that it has been
an upper limit beyond which the planners expect depressed productivity
and inflated wage costs. / The increased cost of the wage fund is
already exerting pressure on economic planners to keep the number of
wage earners in conformity with the previously agreed schedule. It is
expected that this pressure will continue through the Second Five Year
Plan, with efforts being made to keep the growth of wage earners with-
in the planned limits of 6 million or 7 million workers. It is assumed,
of course, that Chinese Communist estimates of planned increases in the
working force realistically reflect the probable demands of scheduled
expansion in production facilities. It appears that the Chinese plan-
ners, if they are in error on these estimates, are probably erring in
the direction of overestimating demand for labor. Thus far the re-
dundance of labor in the new industrial facilities has been one of the
* This number includes, according to the Chinese Communists, "the total
number of workers and staff members of state-owned enterprises, enter-
prises operated by cooperatives, state-private jointly operated enter-
prises, government agencies, people's organizations, and the departments
of culture, education, science and public health throughout the country,
which were included in the state plan." J12
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most persistent complaints of those concerned with cost accounting.
An example of these complaints appeared in a recent authoritative
statement by Vice Premier Po I-po:
Our country has a large population and is rich
in labor resources. At present there is an excess
of workers and staff members in the factories, mines,
and enterprises, throughout the country. As our in-
dustry can only be developed gradually, it is im-
possible to employ large numbers of workers and staff
members annually. Therefore, we cannot rely solely
on industry for the employment of labor. We should
put our minds to agriculture, agricultural subsidiary
production, and handicraft industry, which provide
greater opportunities. 84
Assuming that the number of wage-earners increases by an average
of 1.3 million a year during the Second Five Year Plan as planned,
this would account for only about one-fourth of the minimum number
who annually during 1958-62 are expected to enter the labor force in
search of work.* The remainder, about 4 million people, would annually
enter agriculture, handicraft, or some self-employed activity, or would
remain unemployed. Agriculture undoubtedly will be forced to absorb
most of the labor force increase over the period of the Second Five Year
Plan. Underemployment in rural areas is both less obvious and less
costly than in urban areas. It is therefore likely that surplus urban
population will continue to be moved out of cities and shifted to rural
areas for farm work, even though opportunities are.no more plentiful in
those areas than in cities. A continued emphasis on massed labor pro-
jects is probable, therefore, in order to utilize rural labor which might
otherwise be wasted in unprofitable work. If Chinese agriculture is to
continue raising total output, increased capitalization and improved
techniques will be far more important than increased labor inputs.
* Losses to the labor force through death or retirement are expected
to be quite low through this period. A survey made in 1955 indicated
that 92 percent of all industrial and construction workers were below
the age of 1.5 years and that.only 1 percent of the total were over
55 years of age. Workers over 60 years of age included only 0.3 per-
cent of the total. 8 If this same proportion applied to the 24 million
wage workers in 1956, then it would follow that only 72,000 wage workers
were over 60 years of age in 1956.
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Rapid economic development, spurred by emphasis on industrialization,
would appear to be the long-range solution to the employment problems of
China. There is some question, however, whether or not Communist China
can develop its economy fast enough to provide the necessary capital for
further investment and at the same time meet the consumption demands of
its large and rapidly expanding population. This matter of timing is
further related to the concentration of investment funds in modern,
mechanized industrial plants, which obviously are not designed to ease
the unemployment problem. The Chinese believe that capital-intensive
industries will, over the long run, generate a greater surplus for
capital formation and thus make a bigger contribution to national in-
come and employment than would the traditional labor-intensive industries.
In the case of the cotton-textile industry -- as, for example, in
India (see Table 2) -- it is apparent that small-scale plants not only
Relationship of Capital, Output, and Employment
in the Cotton Weaving Industry of India a/
Rupees
Type of Industry
Capital Per
Worker
Output Per
Worker
Output Per
Unit of
Capital
labor Employed
Per Unit of
Capital
Modern mill
(large scale)
1,200
650
0.54-
1
Power loom
(small scale)
300
200
0.67
4
Automatic loom
(cottage
industry)
90
80
0.89
13
Handloom
(cottage
industry) 35 45 1.29 34
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can employ more workers than large-scale plants (per unit of capital
invested) but also can achieve a higher output for the same amount of
capital. In China, similar evidence has been cited for seamless tubing
plants: "The funds used for building a highly automatic plant capable
of producing 60,000 tons of seamless tubing a year are enough to build
two plants with less degree of automation capable of producing more
than 100,000 tons of seamless tubing a year." 87 Because there has
been growing recognition 88 that investment in smaller plants will
give quicker returns, in both profit and physical output, Chinese Com-
munist planners are now shifting toward more emphasis on small- and
medium-scale plants. This policy shift implies shortcomings in
previous investment planning -- that is, concentration of investment
in capital-intensive, modern plants not only used large amounts of
scarce capital funds but concomitantly failed either to utilize the
abundant manpower resources or to maximize output.
Although the comparison of plant size is made within the same in-
dustry, there are also employment problems involved in investment
policy between different industries. Wu Ching-ch'ao, a prominent econ-
omist, has stressed this fact by pointing out that the Second Five Year
Plan of Communist China has plans for hiring less than one-fourth of
the people who can be expected to ask for jobs. 90 To illustrate the
high cost of raising employment in modern industry, Wu cites the fol-
lowing examples of the investment cost in India for each additional
worker by industry 91/:
Type of Industry
Investment Required for
Each Additional Worker
(Rupees)_
Basic industry
20,000
Consumer goods industry
8,750
Service industry
3,750
Family industry (including agriculture)
2,500
In spite of the far greater cost of raising employment in industry,
Wu concludes that China must keep the emphasis on rapid industrial-
ization. Admitting that this policy will create employment problems
over the "next few Five Year Plans," Wu recommends birth control as
the only solution to employment difficulties. 92
With the population increasing at a reported net gain of approx-
imately 15 million people a year, birth control has become a major
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objective of the Chinese Communists. The prospect that the population
growth of China might level off in the next 10 years, however, is con-
sidered unlikely, because any decline in birth rates resulting from the
government's program of birth control would probably be more than bal-
anced by declines in the death rate. In any event, control over the
growth of population is a long-range solution that has little to do
with the employment problem over the next 15 years, the labor-force
candidates for that period having already entered the population.
The number of Chinese outside the labor force who are neither at
work nor seeking work is estimated to include more than 320 million
people in 1957. This burden of dependency is now growing rapidly as
reductions in infant mortality allow more and more of the annual crop
of babies -- believed to number about 30 million a year 93 J -- to
survive to adulthood. The proportion of the population aged 0 to 15
years is expected to increase during the next 10 years, during which
time the labor-force participation rate will decline. Thereafter
the number of entrants into the labor force should increase abruptly
as the effects of lowered mortality in the post-1950 period are felt
in the labor force. The resulting increase in need for employment is
not expected to be felt before 1965, when the present baby boom reaches
the labor market; the capital investment necessary to expand oppor-
tunities for employment, however, will depend on accumulation in the
interim period. This accumulation of capital will have to compete
with the consumption needs of a population which has recently entered
a stage of rapid growth.
To summarize, prospects in Communist China for significant changes
in unemployment and underemployment are largely dependent on official
policies of investment and manpower allocation. These policies, with
their expected effect on employment problems, can be subsumed under
four general categories:
1. A shift of investments to smaller industrial plants can be
expected to open up new employment opportunities at a relatively
modest cost. As this new policy is already being implemented, 94
it is likely that most of the industrial workers now classified as
surplus tan be absorbed in the proposed small- and medium-size plants.
2. The policy of according priority to heavy industry is expected
to be maintained. This policy will continue to require large capital
investments for each worker added to the labor force, whereas a policy
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favoring consumer, or light, industry would more efficiently utilize
the large manpower potential, and with lower investment requirements.
3. The birth control policy of Communist China is not expected to
lower significantly the present high rate of population growth, over
at least the next decade. Not only is the rapidly growing population
requiring a large share of the national income for consumption but it
is thereby limiting capital formation which will be necessary for
expanding job opportunities in the future.
4. The heavy stress placed on socialization by the Chinese Com-
munists has greatly restricted opportunities in private and self-
employment. Recent encouragement of subsidiary occupations in rural
areas should ease the underemployment problem there, assuming a con-
tinuation of this relaxed policy. In urban areas, however, govern-
mental limitations on self-employment and private employment will
probably continue to make this sector a poor source for new employment.
In short, the government of Communist China seems committed to a
program which offers little hope of expanding job opportunities fast
enough to keep up with the need. With the population now growing at
a steadily increasing rate, the demands on the national income for
both consumption funds and investment funds can be expected to grow
at an even faster rate. Only a major shift in investment policy, or
decimation of the population, could greatly reduce the underemployment
which is expected to remain through at least the Second Five Year Plan.
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