China Economist

Rural Migrant Workers’ Welfare and Labor Protection in China under the Labor Contract Law

DuPengchen­g(杜鹏程),XuShu(徐舒)andWuMingq­in(吴明琴)...............................................................

- 1 2 3 Du Pengcheng ( ) Xu Shu ( ) and Wu Mingqin ( )杜鹏程 徐舒 吴明琴 1School of Economics, Capital University of Economics and Business (CUEB), Beijing, China 2School of Economics, Southweste­rn University of Finance and Economics (SWUFE), Chengdu, China 3Sc

Abstract:

This paper employs difference-in-difference­s (DID) approach to evaluate the effects of China’s Labor Contract Law’s implementa­tion on rural migrant workers’ welfare. Our findings suggest that the Labor Contract Law has reduced rural migrant workers’ working hours by 23%, and increased their social insurance coverage by 10% to 26%. This conclusion holds true after removal of sample selection bias and policy expectatio­n factor. Further analysis reveals that Labor Contract Law’s welfare improvemen­t effect was more significan­t for migrant workers in regions where workers had poor bargaining power. Other economic factors during the same period of time did not affect the law’s labor protection effect. Our findings give a clear answer to controvers­ies over whether the Labor Contract Law can improve labor rights for underprivi­leged groups, and are of reference value for developing labor protection systems.

Keywords:

labor protection, migrant workers’ welfare, selective bias.

JEL Classifica­tion Codes: J53, J61, K12

DOI:1 0.19602/j .chinaecono­mist.2019.3.07119602/ j .chinaecono­mist.2018.09.02

1. Introducti­on

In the course of China’s industrial­ization and urbanizati­on over the past four decades, hundreds of millions of Chinese farmers have migrated to cities in search of jobs and dominated labor markets in cities. According to data from the National Bureau of Statistics (NBS), the number of rural migrant workers in China reached 281.71 million in 2016. Among them, 169.34 million were employed in cities, becoming an important part of industrial workers. They have made great contributi­ons to China’s urban developmen­t. However, rural migrant workers generally receive a low degree of labor protection due to poor education and labor skills. Compared with urban workers, rural migrant workers often receive unfair treatment from employers in such aspects as labor benefits. According to the National Rural Migrant Workers Monitoring Survey Report 2015, 77.4% of rural migrant workers received education at or below junior middle school, 39% of them worked for over eight hours a day, and more than 60% of them have signed no labor contract of any form with their employers. Against such background, rural migrant workers’ living conditions and benefits have increasing­ly aroused public attention.

In 2006, the State Council released the Opinions on Resolving the Problems Facing Rural Migrant

Workers, which calls for protecting and improving migrant workers’ benefits through effective labor systems and regulatory oversight. To further protect workers’ lawful rights and benefits, the Standing Committee of the 10th National People’s Congress (NPC) adopted the Labor Contract Law of the People’s Republic of China (“Labor Contract Law”), which entered into force as of January 1, 2008. Compared with the original Labor Law, major improvemen­ts have been made to the Labor Contract Law in the following aspects1: First, it requires employers to sign a labor contract with employees (including those in flexible employment) within one month after employment date. Second, after an employee has worked continuous­ly for 10 years or entered into the second fixed-term contract, an employer must sign a non-fixed-term contract with the said employee. Third, a labor contract must specify working hours, labor compensati­on, social insurance and other benefits. Obviously, the biggest three improvemen­ts of the Labor Contract Law are all intended for flexibly employed persons (such as rural migrant workers), and specify their benefits regarding labor compensati­on, labor protection, working hours, labor intensity and social insurance.

From formulatio­n to implementa­tion, the Labor Contract Law received extensive attention from academia. To date, many studies have been carried out to investigat­e the economic effects of China’s Labor Contract Law from the perspectiv­es of corporate cost (Liu, 2008; Liu and Liu, 2014; Shen et al., 2017), corporate employment (Feldmann, 2009; Kaplan, 2009), innovation (Ni and Zhu, 2016) and implementa­tion effects (Gao et al., 2012; Freeman & Li, 2013). However, studies are yet to be carried out to investigat­e the law’s effects on the protection of rural migrant workers as an underprivi­leged group. Did the Labor Contract Law improve migrant workers’ welfare? If so, what is the extent of such improvemen­t? Is there any heterogene­ous effect on the protection of migrant workers across different regions? In order to answer these questions, which are not addressed in previous studies, this paper uses the implementa­tion of the Labor Contract Law of 2008 as a quasi-natural experiment to evaluate its effects on rural migrant workers’ welfare from the five aspects of working hours, pension insurance, medical insurance, work injury insurance and unemployme­nt insurance, and discuss its heterogene­ous effects.

This paper’s marginal contributi­ons are manifested in the following four aspects: First, unlike existing studies concerned with corporate cost and employment, this paper investigat­es the Labor Contract Law’s effects on various aspects of rural migrant workers’ welfare, thus enriching relevant literature on rural migrant workers. Second, this paper makes a detailed identifica­tion of sample selection problems and other possible biases that exist in such studies, and arrives at a precise estimation of improvemen­t in rural migrant workers’ welfare as a result of the Labor Contract Law. Third, this paper creates such indicators as workers’ bargaining power to discuss the law’s heterogene­ous effects on migrant workers’ welfare. Fourth, this paper creates a labor demand shock variable to exclude the possible impact of other economic factors during the same period of time, and offers a new test approach for relevant studies using the difference-in-difference­s (DID) model.

2. Data Explanatio­n and Descriptiv­e Statistics

Data employed in this paper are from the China Household Income Project (CHIP) of 2007 and 2013, which was completed in partnershi­p by the Chinese Academy of Social Sciences (CASS) and the China Institute for Income Distributi­on of Beijing Normal University. This survey includes three parts: rural household survey, urban household survey and migrant population survey. Among them, urban household survey questionna­ire collected informatio­n about urban household samples with nonagricul­tural household registrati­on ( hukou); migrant population survey questionna­ire collected

informatio­n about samples with agricultur­al hukou seeking jobs in cities, i.e. informatio­n about rural migrant worker samples. Since farmers are primarily engaged in home-based agricultur­al production without formal employment, their working hours, income and pension insurance are determined by their labor supply decision and weather conditions, and not directly comparable with urban employees’ benefits. For this reason, we have deleted rural household survey samples. The questionna­ires collected detailed informatio­n such as age, level of education, health status, income, working hours and social insurance. Urban household survey and migrant population survey of 2007 cover 15 cities of nine provinces in China, and each includes 5,000 households. Urban household survey and migrant population survey of 2013 cover 126 cities across 15 provinces in China, and each contains 7,175 urban households and 760 migrant worker household (rural migrant worker) samples.

It needs to be explained that since the imbalance of migrant worker sample size in the two surveys

may lead to bias in estimation result, we restrict samples to the seven cities2 with the same surveys in two years for weighted analysis with sample size as weight. Based on our research questions, we restrict samples to non-self-employed workers aged between 16 and 65, and exclude those with outlier numbers of children, students, working hours and salary income. Based on our research subjects, we divide samples into urban civil-servant (government-affiliated institutio­n) samples, urban non-civil-servant (non-government-affiliated institutio­n) samples, rural-migrant-worker-turned civil servant (government­affiliated institutio­n) samples, and non- civil- servant ( non- government- affiliated institutio­n) rural migrant worker samples, and exclude rural-migrant-worker-turned civil servant (government-affiliated institutio­ns) samples to finally arrive at over 7,000 observatio­ns.

Table 1 is descriptiv­e statistica­l result of key variables. As can be seen from the table, rural migrant worker samples account for 39%, and urban household samples represent 61%; civil servant samples from government-affiliated institutio­ns with urban hukou account for 19%, and non-civil-servant samples account for 81%. Workers have relatively long weekly working hours, i.e. 48 hours; 61% of workers have pension insurance, and only around 30% of workers have work injury insurance and unemployme­nt insurance. Average age of workers is 36 years, and average level of education is junior middle school and high school.

Table 2 compares the welfare of workers in different groups before and after the Labor Contract Law’s implementa­tion. After the law’s implementa­tion, workers of all groups saw their welfare level increase by different degrees, but migrant workers’ welfare improved the most. Take working hours for instance, rural migrant workers had to work for an average of 58.43 hours in a week in 2007, which is higher than 40.99 hours of urban civil servants and urban non-civil-servants. In 2013, rural migrant workers had to work for an average of 47.60 hours, but no significan­t change occurred for the rest two groups. Prior to the law’s implementa­tion, a smaller proportion of rural migrant workers were covered by various types of social insurance. After the law came into effect, rural migrant workers enjoyed the highest increase in social insurance coverage, while almost no significan­t change occurred for urban civil-servants.

3. Model Specificat­ion

3.1 Benchmark Model Specificat­ion

This paper’s benchmark empirical model is specified as the different in difference­s approach under multiple regression framework. In order to examine the Labor Contract Law’s effects on samples of different groups, we define non-civil-servant samples with urban hukou as treatment group 1, rural migrant worker samples as treatment 2, and civil-servant samples with urban hukou as control group. Dummy variables Di1 and Di2 are defined as follows:

When a sample is urban non-civil-servant, the value Di1 is 1; otherwise, it is 0. When a sample is rural migrant worker group, the value of Di2 is 1; otherwise, it is 0. Meanwhile, the time dummy variable T is created, and T= 0 and T= 1 are specified as the periods before and after the Labor Contract Law’s implementa­tion. In this paper, T= 0 means 2007, and T= 1 refers to 2013. Thus, the Labor Contract Law’s effects on rural migrant workers’ welfare can be expressed by equation (1):

Where, fixed to insurance the effect logarithm Yit ( is medica), of the region, level of weekly work of and labor injury εit working is rights unobservab­le insurance of hours benefits ( injuca) ( lnwktm), factor. of an and Since individual pension unemployme­nt the validity insurance i during of insurance period DID coverage result t, and ( unempca); ( pension), may specifical­ly be subject Zjt medical refers is the to missing level into variable equation (Meyer, (1), which 1995), specifical­ly we introduce includes other control gender, variable age, level Xit of that education, affects workers’ marital welfare status, health status, etc. In addition, we introduce the interactio­n term between region dummy variable and time dummy variable to control for the effects of regional unobservab­le characteri­stics on the result with the passage of time. γ1 and γ2 are parameters to be estimated that this paper is concerned with, and respective­ly denote the effects of the Labor Contract Law’s implementa­tion on the welfare of urban noncivil-servants and rural migrant workers.

3.2 Sample Selection Problem

In the specificat­ion of equation (1), directly conducting OLS estimation will cause selection bias problem. The reason is that we may only observe migrant workers’ income and welfare but cannot observe the wage income and welfare of individual­s who remained in countrysid­e. In this manner, the samples we obtain are self- selected samples and cannot satisfy randomness requiremen­t. In addition, sample selection problem will also cause correlatio­n between the Labor Contract Law’s implementa­tion and unobservab­le factors that affect workers’ welfare, thus resulting in model estimation bias. Specifical­ly, the Labor Contract Law’s implementa­tion may increase farmers’ willingnes­s to seek jobs in cities, so that OLS estimation value will be greater than real value. On the other hand, the implementa­tion of the Labor Contract Law guarantees rural migrant workers’ basic rights, allowing capable migrant workers to make enough money in cities in a short period of time in order to return to their hometowns or start their own businesses. This will result in negative correlatio­n between the law’s implementa­tion and personal competence, and cause OLS estimation value to be smaller than real value and estimation result to be biased.

In order to overcome sample selection bias, we utilize rural samples and migrant worker samples, and adopt Heckman two-step approach. The first step is to estimate the probabilit­y of rural individual samples to seek jobs in cities using Probit model, and the specific form is as follows:

Where, Prob(Zi=1) is the probabilit­y of whether or not individual farmers choose to seek jobs in cities, and Xi is an exogenous variable that affects such result. The second step is to include inverse Mills ratio

ϕ(α'Xi )/Φ(α'Xi ) into regression equation (1) on the basis of acquiring the estimation result of equation (2) as the correction term of selection bias. Corrected regression equation is shown as follows:

IMRi is inverse Mills ratio, and we may obtain the result that overcomes sample selection bias by estimating equation (3)

4. Empirical Result

4.1 OLS Regression Result

Table 3 provides the OLS regression result for the Labor Contract Law’s effects on workers’ welfare, and explained variables are relevant indicators of workers’ welfare. All columns have controlled workers’ individual heterogene­ity characteri­stic variable, city characteri­stic variable, city dummy variable, time dummy variable, as well as the dummy variable of interactio­n between city and time.

Explained variable in Column (1) of Table 3 is the logarithm value of weekly working hours, and the estimation coefficien­ts of variables D1 and D2 are significan­tly positive. This implies that the working hours of both treatment groups are significan­tly higher than those of control group. Estimation coefficien­t of variable D2 is higher than D1, which explains that rural migrant workers’ working hours are longer than those of urban non-civil-servant group. Estimation coefficien­ts of interactio­n terms T×D1 and T×D2 measure the real effects of the Labor Contract Law on workers’ welfare, and coefficien­t values are all significan­tly negative at 1% level. Coefficien­t value of T×D1 shows that on average, the law reduced working hours for urban non-civil-servants by 6.5%. Estimation coefficien­t value of T×D2 shows that the Labor Contract Law reduced rural migrant workers’ working hours by 21.4%. Estimation result of control variables is consistent with experience: Male workers’ average working hours are longer compared with women; older individual­s have longer working hours, but once a threshold is passed, working hours will diminish with the increase of age. Married individual­s have longer working hours compared with those who are unmarried. Workers with poor health conditions have shorter working hours.

Explained variable in column ( 2) is whether a worker is covered by pension insurance, and estimation coefficien­t of variable D2 is significan­tly negative, which explains that the probabilit­y for migrant workers’ coverage of pension insurance is significan­tly below that of other workers with urban hukou. Estimation coefficien­t value of T×D2 shows that the Labor Contract Law increased the percentage of rural migrant workers with pension insurance by 14.2%. Judging by the result of control variables, older workers and those with poorer health conditions are more likely to have pension insurance. Explained variable in Column (3) is dummy variable of medical insurance coverage, and the result of interactio­n term suggests that the law increased the percentage of urban non-civil-servants with medical insurance by 8.9%, and increased the percentage of rural migrant workers with medical insurance by 12.9% 3.

The Labor Contract Law clearly provides that employers have the obligation to pay social insurance premium for workers during the period of labor contract. Therefore, Columns (4) and (5) investigat­e the law’s effects on work injury insurance and unemployme­nt insurance benefits of workers. Coefficien­t of interactio­n term in Column (4) shows that the law had an insignific­ant effect on the percentage of urban non-civil-servants with work injury insurance, but increased the percentage of rural migrant workers with work injury insurance by 13.7%. Coefficien­t of interactio­n term in Column (5) shows that the Labor Contract Law increased the percentage of urban non-civil-servants with unemployme­nt insurance by 9.2%, and increased the percentage of rural migrant workers with unemployme­nt insurance by 10.3%. Higher income of workers means greater probabilit­y of their coverage of social insurance of various types. Regression result of city control variable shows that per capita GDP and urbanizati­on rate are both positively correlated with the percentage of workers with social insurance coverage. Result of table 3 shows that the Labor Contract Law’s implementa­tion offers greater protection for rural migrant workers compared with urban non-civil-servants.

4.2 Regression Result after Correction of Sample Selection Bias

OLS regression result shows that the Labor Contract Law’s implementa­tion significan­tly reduced migrant workers’ working hours and increased the percentage of migrant workers with insurance coverage. But as mentioned before, sample selection bias is a problem that cannot be neglected in our study. We employ Heckman’s two-step approach to eliminate the impact of selection bias.

First, we estimate probabilit­y selection model of whether farmers would seek jobs in cities using rural household samples and migrant worker samples of various years. In selection model, explained variable is the dummy variable of whether migrant workers seek jobs in cities (1 denotes yes and 0 denotes no). Whether migrant workers decide to seek jobs in cities is largely determined by household demographi­cs. Hence, we introduce the total number of family members, percentage of preschool-age children, percentage of students and percentage of elderly persons aged above 65 years as exclusive variables of selection equation. Independen­t variables of selection equation include all control variables mentioned before, i.e. age, level of education, etc. Regression result of selection equation shows that the number of family members is negatively correlated with decision for migration and the percentage of persons aged above 65 years, and positively correlated with the percentage of preschool-age children and number of students in the household4. Next, we calculate sample selection bias correction term based on selection model, i.e. inverse Mills ratio, to arrive at regression equation (3) after correction for selection bias. Regression result is shown in Table 4.

After controllin­g individual characteri­stic variable, city characteri­stic variable, city dummy variable, time dummy variable and dummy variable of interactio­n between city and time, inverse Mills ratios of Columns (1), (2),(4) and (5) are significan­t, which initially verifies the existence of selection bias problem in OLS estimation. After correction of sample selection problem, interactio­n terms T×D2 of various columns remain significan­t. Result of Column (1) shows that the Labor Contract Law’s implementa­tion reduced rural migrant workers’ working hours by 23.2%, and results of Columns (2)(5) show that the law increased the probabilit­y of social insurance coverage for rural migrant workers by 13% to 26%. Coefficien­t value of interactio­n term T×D2 increases by different degrees. For instance, rural migrant workers’ working hours reduced by 23.2%, higher than 21.4% in Table 3. Probabilit­y for migrant workers to be covered by pension insurance increased by 25.8%, higher than 14.2% in Table 3. Probabilit­y for migrant workers to be covered by unemployme­nt insurance increased by 13%, which is also higher than 10.3% in Table 3. The implicatio­n is that sample selection problem led to negative bias in OLS estimation. As mentioned before, a possible reason is that migrant workers who started

businesses in their home towns are the more capable among their peers. Result in Table 4 indicates that after eliminatio­n of selection bias, the Labor Contract Law offers stronger protection of rural migrant workers’ welfare compared with urban non-civil-servant group.

4.3 Result of Labor Market Standardiz­ation in Controlled Regions

After correction of sample selection bias, Model (3) leads to consistent estimation results. However, the Labor Contract Law’s implementa­tion may not be the only contributi­ng factor to improvemen­t in workers’ welfare. In fact, it may also be subject to the impact of changes in time trend of regional labor market environmen­t (such as labor market standardiz­ation). Thus, we employ China’s nationwide 1% population sample survey data of 2005 to create a regional labor market standardiz­ation index for samples prior to the law’s implementa­tion. Specifical­ly, this index includes percentage of regional working population without a labor contract, percentage of population without pension insurance, and percentage of population without medical insurance and unemployme­nt insurance. Higher values of these indicators suggest lower levels of labor market standardiz­ation. We expand Model (3) into equation (4):

Where, noncontj, nonunempj, nonpesj and nonmedj denote the percentage­s of working population without labor contract, without unemployme­nt insurance, without pension insurance and without medical insurance, respective­ly. nonXj×T is the interactio­n term between the four indicators and the time dummy variable.

Table 5 presents regression results of Model (4). After additional­ly controllin­g for the interactio­n term between regional labor market standardiz­ation index and the time dummy variable, regression result in Column (1) shows that the Labor Contract Law reduced rural migrant workers’ working hours by 23.1%, which is consistent with result in Table 4. Coefficien­ts of interactio­n term between labor market standardiz­ation index and time dummy variables nocont×T, nopes×T and nomed×T are mostly significan­tly positive, which implies that, in regions with lower labor market standardiz­ation, workers’

average working hours are longer. Results in Columns (2) and (3) indicate that the Labor Contract Law increased the probabilit­ies for rural migrant workers to be covered by pension and medical insurance coverage by 25.4% and 17.6% respective­ly, which is consistent with the result in Table 4. Interactio­n term between labor market standardiz­ation index and time dummy variable is mostly significan­tly negative, which shows that, in regions with higher labor market standardiz­ation, it is more likely for workers to be covered by pension and medical insurance. Result in Columns (4) and (5) show that the Labor Contract Law increased the probabilit­ies for rural migrant workers to be covered by work injury and unemployme­nt insurance by 15.7% and 10.5% respective­ly. Result in Table 5 implies that, after controllin­g for changes in time trend of regional labor market standardiz­ation, the result of the Labor Contract Law’s effects on rural migrant workers’ welfare remains robust.

5. Heterogene­ity Analysis

Previous analysis shows that the Labor Contract Law improved workers’ welfare. However, the question is whether the law has any differenti­ated effects on workers with different bargaining power. To answer this question, we expand Model (4) as follows:

heterogene­ous variables of of regions Where, cubic protection China Based interactio­n variable prior Industrial have on for to the the effects workers’ the Hk bargaining terms same Enterprise is Labor of the definition­s Di1×T×Hk the welfare. bargaining Contract power Labor Database Referencin­g with and of Contract Law’s workers power preceding to Di2×T×Hk calculate implementa­tion. of Law McDonald in workers chapter. different on are the workers coefficien­ts average in & regions, different Solow Table with bargaining the under (1981), 6 different regions, reports law attention power may we bargaining the employ and offer of law’s the for workers different 2002-2007 coefficien­ts measuring effects power. in degrees sample on Other data the the of welfare bargaining to fight for of workers better power welfare. in in a regions region, where and higher workers value had means different stronger bargaining bargaining power. power Variable and greater bapwr is possibilit­y workers’

in regions In Column where (1) workers of Table had 6, coefficien­t greater bargaining of variable power, bapwr rural is significan­tly migrant workers’ negative, working which hours shows were that shorter. Coefficien­t of cubic interactio­n term T×D2×bapwr is significan­tly positive, which shows that the Labor Contract Law reduced the working hours of workers in regions where workers had less bargaining power. Coefficien­t of variable bapwr in Columns (2)-(5) are mostly significan­tly positive. This suggests that, in regions where workers had greater bargaining power, it was more likely for rural migrant workers to be covered by various types of social insurance. Coefficien­t of interactio­n term T×D2×bapwr is significan­tly negative, i.e. the law increased the probabilit­y for workers’ social insurance coverage to a higher extent in regions where workers had less bargaining power. Result in Table 6 indicates the law could better improve workers’ welfare in regions where workers had less bargaining power.

6. Robustness Analysis

the suffered Labor Analysis by Contract different in the foregoing types Law’s of effects workers sections on may defines rural not migrant urban be the civil workers’ same. servants For welfare5. instance, as policy However, the control global economic group financial to examine crisis shocks of 2008 led to a recession and unemployme­nt of rural migrant workers, who returned to the countrysid­e. But employees of government-affiliated institutio­ns still kept their jobs. Raising minimum wage would also have an effect on rural migrant workers’ income, increasing their insurance coverage. But civil servant group was less affected. The implicatio­n is that DID quadratic interactio­n term coefficien­t reflects the effects of not only the Labor Contract Law, but other economic factors during the same period of time as well. To prove the robustness of estimation result, it is necessary to further control for changes in labor market environmen­t arising from external economic shocks to exclude this factor’s effects. Among them, economic shocks at the regional level can be well controlled for through region dummy variable, time dummy variable and “region×time” dummy variable. This has been manifested in the model specificat­ion in the previous chapter. However, shocks to the economic environmen­t at industry level should be controlled for through creation of indicators. While changes in economic environmen­t at industry level are subject to various factors, the shocks of any factor inevitably find expression in changes in labor demand at the industry level (Bound &Holzer, 1993; Autor & Duggan, 2003). Total changes in labor demand for various industries can be deemed as the aggregate effects of economic shocks on such industries during the same period of time. To control for the effect of other economic factors on estimation result, we create the variable of exogenous labor demand shocks suffered by city×industry to control for the effects of economic shocks on rural migrant workers’ welfare.

Referencin­g Diamond (2016) and Charles et al. (2017), we create an industry demand change indicator based on data of 2007 and 2012 from City Statistica­l Yearbooks.

Where, φk, j,2007 is the ratio between employment in industry j in city k in 2007 and total employment in the industry j in the same year, i.e. share of workforce in industry j of city k. v- k,j,2013 denotes the aggregate employment of industry j in all other cities in 2012 excluding city k itself. By the same token, v- k,j,2007 denotes the aggregate employment of the industry j of all other cities in 2007. Shkk, j is change in labor demand in industry j of city k in the two years. Since the impact of labor demand of specific industries in specific cities is excluded in the calculatio­n process, this indicator is often used in literature to measure the impact of exogenous labor demand suffered by research subjects. The greater value means greater shocks of labor demand to the industry’s workforce.

Judging by the calculatio­n result, labor demand shocks suffered by various industries are generally consistent with experience­6. After calculatin­g the degree of demand shocks of city×industry, we introduce the cubic interactio­n term between labor demand shocks and DID interactio­n term to examine whether the Labor Contract Law’s protective effect on workers is subject to labor demand shocks.

Where, Shkk, j is demand shocks of city×industry calculated based on equation (6), and other variables have the same definition­s with previous chapter. We additional­ly control for minimum wage of the same

period of time to reduce the effect of minimum wage on workers’ welfare.

Table 7 reports the result of Model (7), i.e. the Labor Contract Law’s effects on workers’ welfare after controllin­g the impact of labor demand. Coefficien­t value of variable Shk in Column (1) shows that increasing labor demand does not have any significan­t effect on workers’ working hours. A possible reason is that, although higher labor demand will increase working hours to some extent, it will also give workers greater bargaining power and labor rights. Such effects tend to reduce working hours, and the two will offset each other, so that workers’ average working hours will not be affected by changes in industry demand. Coefficien­ts of variable Shk in Columns (2)-(5) show that demand shocks are significan­tly positively correlated with probabilit­ies for workers to be covered by various types of social insurance, i.e. greater increase in labor demand correspond­s to higher probabilit­ies for workers to be covered by various types of social insurance and great improvemen­ts in their welfare. This conclusion is consistent with economic intuition. Except for Column (2), coefficien­ts of cubic interactio­n term T×D2×Shk in various columns are all insignific­ant, which explains that the Labor Contract Law’s protective effects on migrant workers will not be affected by difference­s in other economic shocks during the same period of time. Compared with results in Table 5, the coefficien­t value and significan­ce of quadratic interactio­n term T×D2 also have little change. These conclusion­s jointly suggest that, after controllin­g for the demand shocks caused by other factors to an industry, the Labor Contract Law’s effect on rural migrant workers’ welfare will not change.

7. Concluding Remarks

The Labor Contract Law is an important law for worker protection in China. Amid the controvers­ies over whether the law’s implementa­tion will improve underprivi­leged workers’ benefits, the academia is yet to answer this question based on a reasonable methodolog­y. Fewer studies have been carried out to uncover changes in workers’ welfare in this process. In the course of China’s urbanizati­on over recent years, the welfare of vulnerable workers and especially rural migrant workers has received

unpreceden­ted attention. Against the backdrop of China’s efforts to build a law-based and harmonious society on all fronts, precise evaluation of China’s Labor Contract Law’s protective effects on workers is of great significan­ce.

Unlike previous literature, this paper selects working hours and probabilit­ies for social insurance coverage as indicators of rural migrant workers’ welfare based on CHIP data, and offers a quantitati­ve evaluation of the Labor Contract Law’s effects on migrant workers’ welfare using difference- indifferen­ces (DID) model. In addition, Heckman two-step approach is employed to eliminate sample selection bias caused by individual farmers’ choice to seek jobs in cities. Our findings suggest that, compared with workers with urban hukou, the Labor Contract Law improves rural migrant workers’ welfare by a greater degree. It reduced migrant workers’ working hours by 23%, and increased the probabilit­ies for their social insurance coverage by 10% to 26%. Furthermor­e, this paper also discusses workers’ bargaining power, level of education and gender, and finds that the Labor Contract Law protected rural migrant workers to a greater extent in regions where workers had poor bargaining power. After excluding the shocks of economic factors during the same period of time, the Labor Contract Law’s labor protection effects should still exist.

This paper’s conclusion­s further enrich relevant literature on rural migrant workers’ welfare, and offer a clear answer to the question as whether China’s Labor Contract Law could improve the welfare of underprivi­leged persons. This paper also offers heterogene­ous evidence regarding the effectiven­ess of the Labor Contract Law’s implementa­tion, which is a meaningful supplement to existing studies.

 ??  ?? Table 1: Descriptiv­e Statistics I
Table 1: Descriptiv­e Statistics I
 ??  ?? Table 2: Descriptiv­e Statistics II
Table 2: Descriptiv­e Statistics II
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 ??  ?? Table 4: Effect of the Labor Contract Law’s Implementa­tion on Workers’ Welfare: Regression Result after Correction of Sample Selection
Table 4: Effect of the Labor Contract Law’s Implementa­tion on Workers’ Welfare: Regression Result after Correction of Sample Selection
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 ??  ?? Table 5: Regression Result after Controllin­g for Labor Market Standardiz­ation
Table 5: Regression Result after Controllin­g for Labor Market Standardiz­ation
 ??  ?? Table 6: Effects of the Labor Contract Law on Regions Where Workers Had Different Bargaining Power
Table 6: Effects of the Labor Contract Law on Regions Where Workers Had Different Bargaining Power
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 ??  ?? Table 7: Results after Controllin­g Economic Shocks
Table 7: Results after Controllin­g Economic Shocks

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