Feeling Good About the Iron Rice Bowl: Economic Sectors and Happiness in Post-Reform Urban China

Situated in China’s market transition, this study examines the relationship between economic sectors and individuals’ happiness in post-reform urban China. Using datasets from the Chinese General Social Surveys 2003, 2006 and 2008, we find that workers in the state sector enjoy a subjective premium in well-being – reporting significantly higher levels of happiness than their counterparts in the private sector. We also find that those remaining in the state sector report being significantly happier than do former state sector workers who moved into the private sector, whether the move was voluntary or involuntary. Sectoral disparity in the allocation of social welfare benefits serves as the primary nexus linking state-to-private mobility and happiness. Those who made voluntarily state-to-private moves experienced a trade-off in enjoying higher payoffs while losing job security, whereas involuntary downward mobility left long-term psychological scars on those who experienced layoffs or unemployment. Economic Sectors and Happiness in Post-Reform Urban China 3 INTRODUCTION Past research on both industrialized and transitional societies has well documented the detrimental effects of job displacement and unemployment, clearly showing that job security is important for individuals’ subjective well-being and health (e.g., Brand, Levy and Gallo 2008; Burgard, Brand and House 2007; Darity and Goldsmith 1996; Frijters, Haisken-DeNew, and Shields 2004; Gallo et al. 2006; Hayo and Seifert 2003; Namazie and Sanfey 2001; Winkelmann and Winkelmann 1998; Young 2012). However, individuals who experience job displacement and unemployment constitute only a small fraction not only of the total labor force but also of those exposed to insecure working conditions. That is, job security can be viewed broadly as a spectrum of employment-related structural resources and protections allocated differentially across economic sectors. For example, and as discussed more below, researchers have long argued that the U.S. and other western countries have dual labor markets characterized by large disadvantages for workers in the secondary compared to the primary sector in terms of wages, working conditions, and employment stability (Bulow and Summers 1986; Cain 1976; Doeringer and Piore 1971; Reich, Gordon and Edwards 1973; Wachter 1974). A similar distinction also exists in transitional countries such as Russia and Poland, where the private sector exposes workers to greater risks than the state sector, including higher job termination rates and fewer opportunities to obtain permanent positions (Acquisti and Lehmann 2000; Lehmann and Wadsworth 2000; Lehmann, Wadsworth and Acquisti 1999). In general, workers in relatively weak labor market positions tend to have lower perceptions of job security, lower wages, and fewer fringe benefits, and thus to have lower subjective well-being than their counterparts (Linz and Semykina 2008; Yu 2008; Zhao 2012). China provides researchers with a valuable opportunity to examine the role that job security plays in determining individuals’ subjective well-being. China’s economic reform has achieved remarkable success over the past three decades, dramatically shifting employment markets and initiating as well large-scale and striking social changes. One such change during the market reform was the smashing of the iron rice bowl – or the displacement of guaranteed life-time job security, medical benefits, housing, education, and other elements of social welfare given to all public workers by the uncertain potential of jobs in the market economy (Tang and Parish 2000). Today, about 40 percent of China’s population has no job-related benefits (Kuruvilla, Lee and Gallagher 2011). In addition, China’s market reform is progressing gradually and unevenly, with Economic Sectors and Happiness in Post-Reform Urban China 4 social groups affected differentially by the destruction of the iron rice bowl. Recent studies argue that “fragmented markets” have emerged in China, characterized by heterogeneous institutional arrangements, inconsistent practical logic, and distinctive allocation mechanisms between the state and private sectors (Zhao 2012; Zhao and Zhou 2012). Workers in the private sector in urban China enjoy significantly fewer fringe benefits than their counterparts in the state sector, especially those working in government agencies and public institutions (Wu 2013). In addition to representing a fruitful research setting, China is a country that has reason to be interested in empirical findings on how changing employment markets are affecting subjective well-being. From 1978 to 2010, the employment share of stateand collective-owned units declined from nearly 100% to less than 50%, while the share of private and other non-state enterprises grew concomitantly from nearly nothing to over 50% (China Statistical Yearbook 2011). How this shift has affected perceived well-being, and how well-being may vary by employment sector and sociodemographic group are highly salient questions. For instance, a recent rise in the number of college graduates taking China’s national civil service exam suggests that differences between the state and private sectors have become important factors for youth making career choices (Li, H. 2013). Using data from the Chinese General Social Surveys, this study investigates the relationship between economic sector employment and subjective well-being. We attempt to address two research questions. First, does workers’ subjective well-being differ by economic sector? Second, if yes, does job security or some other factors explain the observed difference?