The Labor Contract Law, Macro Conditions, Self-Selection, and Labor Market Outcomes for Migrants in China

Abstract

China introduced a new Labor Contract Law (LCL, 2008) to protect employees' working conditions and welfare. Early evaluations of labour market outcomes suggest positive effects for workers. In the same period, however, China faced labor market tightening, which facilitated the LCL's introduction and enforcement. Existing evaluations of the LCL treat the introduction of the LCL as being exogenous. We show that labor market tightening and individuals' self-selection into jobs which comply with the Law have affected migrant labor market outcomes. Taking these factors separately into account suggests that, the LCL has had varying effects on labor market outcomes: a negative effect on wages and hours; an unclear effect on having a written contract, and a positive effect on social insurance participation. Data inadequacies prevent us from considering these factors simultaneously. Show more