From permanent employment to massive layoffs: the political economy of 'transitional unemployment' in urban China (1993-8)

As the reform of state-owned enterprises proceeds, a massive number of Chinese workers have been laid off since 1993. Massive lay-offs are rooted in the 'full employment' policy carried out in the state sector under the centrally planned economy. However, the total number of laid-off workers accumulated to a dangerous level in 1998 because the Chinese social welfare system, which depended upon work units for delivering benefits and was limited to the state sector, hindered the mobility of laid-off workers from the state to the non-state sector. To cope with the problem of the high unemployment rate accompanying the transition to the market economy, certain institutional reforms purporting to abolish the institutional barriers between the two labour markets, in the state and the non-state sectors, must be taken into account in China's policymaking.