Advancing social inclusion for China’s internal

rural-to urban migrant workers

To: Ministry of Human Resources and Social Security of P.R.

China & the State Council of P.R. China

From: Xintong Hou

I. Policy Problem: internal migration, hukou system and social exclusion

Since the 1978, China has experienced the largest internal migration in human history.

Nearly 160 million people, which are 12 percent of the total population, left rural

areas to seek work in the cities. Between 2001 and 2010, migration contributed to

nearly 20 percent of China’s economic growth.

In recent years, the new generation of migrant workers--rural youngsters who were

born after 1980 --has become the main part of migrant workers. They are now

accounting for 61.7 percent of the total migrant workers. Compared with the old

generation, they have several differences: a) they have higher levels of education.

Statistics show that 66% second-generation migrant workers have received junior

high school education, 11.5% have received senior high school education and from 16%

to 30% of the above two groups of migrant workers have received some kind of

vocational training; b) they have higher self expectations and are eager to become

urban residents. Although still registered as rural residents, some of them have

actually grown up in big cities and familiar with urban lifestyles. Most of them don’t

know how to do farm works. Therefore unlike the previous generations, they want to

stay in cities permanently; c) they have stronger awareness of protecting legal rights.

They will pay more attention to labor contracts and various social insurances when

finding jobs and they ask for equal access to education, medical treatment and

employment as urban residents

Despite their contribution to China’s spectacular economic development and poverty

reduction, current residential registration system, hukou system which divides

residents into urban residents with urban hukou and rural residents with rural hukou

has not yet been completely reformed and thus serving as a fundamental barrier to the

integration of internal rural-to-urban migrant workers.

This problem is a social exclusion problem. Firstly, the current social security system,

based on hukou system and a large number of local pools, discriminates against

migrant workers because of their mobility and the lack of mechanisms to transfer

benefits between pools.

In 2005, the Institute of Population and Labor Economics (IPLE) of the Chinese

Academy of Social Sciences (CASS) conducted the second round of the China Urban

Labor Survey (CULS) in 12 cities. According to the survey (See Table 1 at Appendix),

the participation rates of migrant in pension, unemployment, work injury and medical

insurances is much lower compared with urban residents.

The reasons for the low coverage may include: a) There is no compulsory requirement

for local governments and private enterprises to provide social insurance for migrant

workers; b) Local governments will face an additional financial burden by extending

social insurance system to migrant workers; c) Migrant workers are not willing to

afford the current individual contribution rate of social insurances, which is 8% of

wage for pension insurance, 1% for unemployment insurance, and 2% for medical

insurance. Besides, they will lose money in pooling accounts contributed by their

employers if they change jobs; d) the high mobility of migrant workers increase

management costs for providing social insurance for them.

Secondly, migrant workers are also deprived of opportunities for pursing more

ambitious life and career dreams since they could not have equal access to education,

housing .and employment opportunities as the urban residents. Migrant workers have

hardly any opportunity to receive formal education after entering the city. The only

and probably the most feasible way of enhancing their human capital and

work-related skills is through on-the-job training. Many work units, however, do not

provide such an opportunity for migrant workers. The situation for the education of

their children is also a matter of grave concern. The CULS survey shows that the

share of migrants who send their children to schools in local urban areas rose from 52

percent in 2001 to 62 percent in 2005, but most migrants have to pay extra fees.

Tuition fees differed by more than 50 percent between students with and without local

hukou in 2001, declining to around 30 percent in 2005. The difference is similar in

large and small cities (See table 2 at Appendix). As a result, their children will face

the risk of being locked into generational inequality.

Finally, this social exclusion of migrant workers also has spatial dimension. Because

migrant workers are relatively poor and have few channels for expressing their

interests and protecting their rights, they tend to live in poor communities and receive

less and poorer social services. Also, the local governments are usually less

responsive to their social services needs.

In general, the social exclusion of migrant workers will reinforce inequality and

undermine sustainable development. With the new generation of migrant workers who

are more sensitive to their social rights and know how to use modern communication

technology to organize becoming the majority of migrant workers, this social

exclusion problem has become more visible and more urgent. So the state council and

the ministry of human resource and social security should adopt policies to enhance

inclusion and social protection of internal rural-to-urban migrant workers.

II. Case Comparison

ILO: MIGSEC Project

The ILO Regional Office for Africa, in collaboration with the ILO International

Migration Program and the Social Security Department in Geneva implemented the

MIGSEC Project titled “Strategies for extending social security to migrant workers

and their families from and within Africa” from 01 Oct 2008 to 31 Dec 2010. This

project, funded by the German government, targeted African migrant workers and

their families in 13 countries in Sub-Saharan Africa. These countries include Ghana,

Senegal, Mauritania, Mali (ECOWAS); Tanzania, Kenya, Burundi, Rwanda, Uganda

(EAC); South Africa, Zambia, Mauritius (SADC) and Ethiopia.

The project aims to assist governments, in consultation with the social partners,

namely employers’ and workers’ organizations, to map out national and regional

social security strategies for migrant workers and their families. Project activities

focus on: a) consolidating information and building knowledge about African migrant

workers’ social security coverage and potential strategies to extend it; b) developing

institutional capacities of entities responsible for planning and implementing

strategies and policies for extending social security coverage to migrant workers; and

c) implementing operational measures to offer social security benefits to migrant

workers and their families.

The project expected outputs are: a) the development of national social security

strategies/policies for migrant workers from and within Africa; b) the negotiation of

social security agreements between recipient and sending countries, including

bilateral and sub-regional instruments to ensure maintenance of acquired social

security rights or in course of acquisition for migrant workers and their families; c)

the development of mechanisms for extending social security coverage to migrant

workers’ families, in particular to those left behind in origin countries, through health

micro-insurance initiatives financed by remittances.

MIGSEC by its design was a top-down project with a wide geographical coverage. Its

main interventions are mainly from constitutional frameworks, national policies, and

institutional arrangement level. In general, it succeeded in achieving nearly all

planned project activities, outputs and outcomes. The few unachieved activities and

outputs were mainly due to inactivity or non-responsiveness on the part of project

countries. For example, there was practically no direct collaborative work between

MIGSEC and ECOWAS, the reason being that ECOWAS was not quite responsive to

initial contacts made by MIGSEC. SADC, on the contrary, showed keen interest in

tapping the resourcefulness of MIGSEC to address social security coverage

challenges amongst its member states. MIGSEC, therefore, creditably performed its

duty of providing the technical assistance required to prepare social security

agreements. Besides, it is fair to conclude that MIGSEC was very effective in

reaching out to its indirect beneficiaries, i.e. government officials and representatives

of employers’ and workers’ organizations who participated in capacity building

training programs, attended workshops, had hands-on training in drafting agreements,

etc. Finally, the financial scheme- micro-insurance schemes- played an important role

from technical perspective to enhance migrant workers’ social protection. Enhancing

the portability of long-term social security benefits was also used as a very useful tool

to encourage migrants to participate in the formal sector and thus gaining more

protection.’

Despite its general success, there are also several weaknesses: a) just as mentioned, its

success in sub-region depends a lot on countries’ own willingness to act; b) although

throughout its implementation, MIGSEC had the benefit of working with many

experts and consultants, it failed to create a database of African experts on social

security and migration as well as to collect more data and information on these issues;

c) regular monitoring and evaluation was absent for the project. Also, the project did

not outline any objectively verifiable indicators (OVIs), which would be helpful for

monitoring and evaluation purposes. As a result, it was impossible for the project to

modify its weakness accordingly; d) it failed to use external opportunities to further

the project. In December 2011, the EU Parliament and the EU-Council passed the

“Single Permit” Directive, directing member countries to, within 2 years, adapt their

individual national laws to guarantee equal treatment of legally employed migrant

workers. This is with regard to conditions of work, social security rights, including the

right to have their pensions transferred to the migrant workers’ countries of origin.

With the support of the ILO, this project should have taken full advantage of this

progressive development in the EU.

World Bank: Urban Poverty Project

The initial Urban Poverty Project (UPP) was designed to target urban poor in

Indonesia in response to the 1997 Asian Economic Crisis. Through a bottom-up and

transparent approach, the project’s objective was to improve basic infrastructure in

poor urban neighborhoods and to promote sustainable income generation for its poor

urban residents who are mostly long-term poor, have incomes eroded by high

inflation, or lost sources of income in the economic downturn. Also, the project seeks

to strengthen the capability of local agencies to assist poor communities. Specific

activities include a) organize the poor into groups which would receive micro-credit

loans for income generation or grants for tertiary level infrastructure; and b) promote

the development of community organizations (Badan Keswadayan Masyarakat or

BKM) at the ward (kelurahan) level that would receive block grants that the BKM

would manage as a revolving fund. It was designed to last from May 18 1999 to June

30 2004, with a budget of 100 million.

After UPP’s original goals were surpassed at the end of Phase I (completed in 2002),

however, through the large network of facilitators and field implementers, four

observations came to the forefront: a) income poverty is a limited view of

poverty-poor people demand improvements in various infrastructure and social

services in addition to income generation; b) even well-run micro- credit systems are

not a very effective way to reach the poorest; c) although poor communities value

loans, the main strength of the project is the opportunity it has given them to create an

organization that they elect, with leaders that they trust, and an opportunity to discuss

issues of poverty together as a community; and d) the relationship between the BKM

and local governments needs to be clarified and strengthened.

In response to the above, the Government of Indonesia requested additional financing

to scale-up UPP to UPP2 that evolved in the following directions: a) developing

broad-based community organizations by placing more emphasis on the process of

electing community representatives to the BKM; b) assisting communities to

formulate Community Development Plans that address the multi-dimensional nature

of poverty; c) supporting the formation of city level federations (BKM Forum) which

bring together BKMs from all the kelurahans within the city; and d) encouraging a

partnership between local governments and BKMs through the introduction of the

Poverty Alleviation Partnership Grant (PAPG), which finances activities jointly

proposed by local government agencies and BKMs.

With Phase I1 was under implementation, in 2005, a proposed project as the third

series of UPP requested by the highest levels of Indonesia government, asked to

further expand the coverage of UPP to the rest of the country to make it a national

program. UPP3 aimed to: a) establish and support representative and accountable

community organizations that are able to increase the voice o f the poor in public

decision making; b) make local governments more responsive to the needs of the poor

by increasing cooperation with community organizations; and c) transparently

funding community based organizations and local governments to provide basic

municipal services to the urban poor. The project also provided additional institutional

support and grants to further strengthen about 660 ward- level community

organizations selected in UPP1 and UPP2 and in new development areas.

To sum up, ultimately the UPP project was funded by the World Bank and conducted

by Indonesia’s ministry of settlement and regional infrastructure from 1999-2011,

with a total cost of US$186.10 million. The project has four components: finance

community development and local government capacity building; finance Kelurahan

Grants; fund a poverty alleviation partnership grant and provide implementation

Support. According to the report, the outcome of UPP is satisfactory, with highly

likely sustainability and substantial institutional development impact.

The main reason for the huge success and sustainability of this project, as I see it,

roots in: a) from the beginning of the project, its implementation was bottom-up and

transparent. And instead of the traditional approach of formal evaluation after

completion of each project phase, this project adopted a culture of continual learning,

self-evaluation and improvement; b) developing and giving grants to community level

organizations was an optimal way to empower the disadvantage group. Besides, this

could also give the community more initiative to decide particular social services they

need; c) gradually involving local governments and building partnership between

local governments and BKMs at a more mature level was a more pragmatic way to

ensure both transparency and effectiveness of the project; d) the success of the project

depended fundamentally on the facilitators. Instead of management structure that

supervises the facilitator, the project adopted the "facilitator support" oriented

management that combines vertical support from higher levels of management with

sharing and learning among the facilitators, such as regular meetings, timely coaching

and mentoring, free communication between the facilitators on UPP website; e)

building a strong relationship between government departments and the bank was also

a decisive factor for the success of the project. The Bank’s performance in

identification, preparation and appraisal is rated satisfactory and its performance in

supervision is rated fully satisfactory. It played an instrumental role in converting

what started off as individual projects, into two national programs, which now form a

pillar of the government’s poverty alleviation program.

Comparison

By comparing the outcomes, outputs and sustainability of these two projects, several

lessons could be learnt: a) all stakeholders should be involved by a combination of

top-down and bottom-up approaches to collaborate to achieve the planned objectives;

and collaboration mechanism between different stakeholders should also be

established or improved; b) data and information collection are limited for both

projects, and thus future efforts to improve this is necessary; c) external pressure or

opportunities could be used to boost internal change; d) regular monitoring and

evaluation are decisive for the success of a project; e) rather than setting ambitious

objectives and broad coverage initially, gradual expansion, innovation and

modification based on lessons learnt during the implementation of the project is more

pragmatic and more sustainable; f) capacity building of stakeholders at different

levels and during the whole process of project implementation is important.

III. Recommendations

First, the State Council and the Ministry of Human Resources and Social Security

should collaborate with the National Consensus Bureau to improve data and

information of internal migration. The shortage of information restricts the extent to

which strong conclusions can be drawn and meaningful policies and interventions can

be proposed. Consensus on the definition of the term ‘migrant’ is a precondition to

better data. There is also a need to gain more information so as to get a better

understanding of the diversity in migration streams in terms o f who goes (men only,

men and women, entire families, groups of adolescent girls or boys etc.), the duration

(one week to several months), distance (within the district, to the neighboring district

or cross country) and different groups ( registered versus unregistered migrants, intra-

versus inter-provincial migrations, male versus female migrants, construction workers

versus service staff) in order to tailor support to their very different needs.

Second, from top-down perspective, specific mechanisms are required to safeguard

migrant workers’ social security rights and to overcome the restriction faced under

hukou system. Thus ministry of human resources and social security and the state

council should support bilateral and multilateral agreements between local

governments as for equal treatment of migrant workers. For bilateral agreements,

formal bilateral agreements between sending and receiving provinces, employers and

training institutions, and employers and labor bureaus should be expanded as a safe

and efficient means of managed migration. For multilateral agreements, the two

agencies could firstly target areas with high development level and compatible

bureaucratic and fiscal capacity to ensure the effective implementation of the

agreements. For example, they could help the eastern coastal areas to build regional

network which will require the whole areas adopt the same standard of social security

coverage and social services delivery for migrant workers floating within this region.

Still, the two agencies should work with legal system to issue more acts to protect and

enhance migrant workers’ social rights. And to minimize the gap between what on

the paper and the reality, the two agencies should supervise the implementation of

relevant agreements and laws and do regular monitoring and evaluation so as to

modify their components accordingly in time.

Third, instead of setting the goal beyond the current institutional, bureaucratic and

fiscal capacity, the two agencies should gradually enlarge both geographic and

categorical of social security coverage for migrant workers. And the

multi-dimensional features of migration require enhanced coordination between

relevant government agencies. Information on best practices and lessons learned

should also be shared more widely between these government bodies, provincial

governments and local governments. Pilot programs should be experimented at first in

provinces that show real optimism and determination as well as are more urgent to

increase social security coverage for migrant workers. Such provinces include main

sending provinces like Sichuan, Anhui, Hunan and main receiving provinces like

Guangdong, Zhejiang, Jiangsu, etc. Similarly, the effort to increase the social security

coverage should be initially focus on specific categories. In this case, work injury

insurance, health insurance and pension insurance are the most urgent ones. The

perceived healthcare priorities for the migrant population should include a better

targeting of young female migrants for reproductive health services, better access for

pregnant women to appropriate pre- and post-natal care, and immunization of the

children of migrant worker.

Fourth, the provision of services to communities should be a joint responsibility of

communities and local governments. So the two agencies should work with other

ministries to promote two parallel processes- strengthening community capacity to

organize, aggregate and articulate their needs and priorities, and building the

capacities of local governments- to respond to and work with communities. The 1994

decentralization laws place local governments in charge of providing services to their

citizens. With limited resources, however, local governments will inevitably face

tradeoffs in terms of what and to whom they deliver. They will meet the demands of

the population only if officials understand community priorities and are accountable

to them. This, in turn will require communities to be organized, to aggregate and

prioritize their needs and demands, and to articulate these priorities to government.

Thus, the community should be given the right to develop community level

organizations that are owned and trusted by the communities as well as be able to

carry the aggregated demands of communities to higher levels of government and

demand better services from the government. However, not all community level

services should be provided and managed by communities. Many urban services have

significant network factors and are best managed at a level higher than the community.

So the capacity of local governments to deliver services and to work with

communities should also be strengthened.

Fifth, the bank should be involved in the process. For one thing, the two agencies

should work with the bank to solve the portability of long-term social security

benefits problem so as to increase migrant workers’ own willingness to attend social

insurance. For another, the Bank are instrumental for pilot program designed to

enhance social security coverage for migrant workers and to transfer their remittances

to their left out family members who are still in rural areas. Through involving the

bank, the bank could learn during the process so as to improve the quality of its

financial services for migrant workers. At the same time, the government agencies and

the bank could build more trust for future cooperation.

Finally, the two agencies should also use both external pressure and internal

opportunity to boost change. For one thing, as China becomes more integrated into

international society, the two agencies should ratify more ILO labor conventions, such

as the freedom of association and collective bargaining which would give migrant

workers more leverage to pursue their rights. The two agencies should also more

frequently refer to international standards to advance social rights of migrant workers.

For another, the labor shortage has gradually become a problem since 2004 and 2010

has been called the year of strikes by social media. This opportunity could be seized

by the two agencies to build more political consensus to push local governments to

involve migrant workers and implement existed pro-migrants policies more actively.

There are several limitations of my recommendations based on the lessons from the

two projects: a) my recommendation based on community- level capacity building and

services delivery does not really “target” internal migrant workers. For one thing,

internal migrant workers to some extent interest with the urban poor. I believe

community level capacity building and services delivery could empower them and

make their demand more visible to the local authorities. So in the long run, as the UPP

project shows, this would advance their social inclusion. For another, due to the

multi-dimensional features and limited information of internal migrant workers, it’s

difficult to really target them in practice. In contrast, such targeting may leave some

internal migrant workers behind. For example, at present, legislation and services are

predominantly only targeted to registered migrants; the larger floating population in

the informal economy requires more access to such protection; b) since the two

projects mostly concentrated on perfecting legal framework and community-based

social service delivery, human capital building was not a main theme. But I assume

that the Urban Poverty Project, by giving grants to support community- level

sub-project, would more or less involves components like community-based

education and training; c) my recommendations are based on accepting the current

institutional constraints, including the hukou system and workers’ lack of rights to

associate. So as these constraints may be moved away in the future, more policies

would become useful for social inclusion of migrant workers; d) gender perspective is

missing in these recommendations; and e) my recommendations are based on the very

likely assumption that migrant workers want to stay at urban areas. So they do not

involve the other side of dealing with migrant workers issues-developing and

diversifying the rural economy.

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Appendix

Table 1.Social Insurance Coverage for Local Residents and Migrant in 2005(%)

Local residents workers Rural migrant workers

Pension insurance 59.8 6.0

Unemployment insurance 22.8 3.4

Work injury insurance 8.8 6.0

Medical insurance 50.0 4.0

Source: IPLE-CASS, the 2005 China Urban Labor Survey

Table 2 Higher Costs of Education for Migrant Children

4 large cities

(2001)

4 large cities

(2005)

5 small cities

(2005)

Mean yearly tuition of migrant

children attending school in

urban areas (RMB)

1356 1782 1572

Estimated city tuition with

hukou (RMB)

829 1304 1064

Percentage difference in means 52.6 26.8 32.3

Medium percentage difference 52 33 25

% respondents reporting that

city tuition is higher than city

tuition with a local hukou

81.9% 75.1% 58.1%

Source: 2001, 2005 Chinese Urban Labor Survey