The institutional constraints and other restrictions have caused three different wage levels in the economy and also urban hidden unemployment (figure 9.2, p. 151). Eliminating these distortions should bring about further economic gain to the Chinese economy. This chapter investigates the segregation of the urban resident and rural migrant labour markets in terms of wage determination and occupational attainment, and analyses the impact of elimination of segregation on the urban labour market.

Occupational segregation and the wage gap between urban residents and rural migrants

In this section, two survey data sets are employed to analyse the degree of segregation between rural migrant and urban resident labour markets from the point of view of occupational segregation and wage differentials. Both surveys were conducted in Shanghai. The first is the Shanghai Floating Population Survey (FP) and the second is the Shanghai Residents' and Floating Population Survey (RFP). The surveys were conducted by the Institute of Population Studies at Shanghai Academy of Social Sciences in late 1995 and early 1996, respectively. The design of the questionnaires is quite similar and many variables are in common, thus the two surveys provide a good basis for a comparative analysis.

The FP survey comprises 6,609 individuals, of whom 5,614 are migrants from rural areas (accounting for 85 per cent of the sample). Some surveyed individuals were not in the labour force and are not included in the analysis, resulting in a purged data set of 5,167 individuals.