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The new Urban Poor and Their Situation in Transitional China: Market Exclusion and Institution Isolation

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The new Urban Poor and Their Situation in Transitional China: Market Exclusion and Institution Isolation
Yuting Liu & Fulong Wu
School of Geography University of Southampton Southampton, SO17 1BJ, United Kingdom
njlyt2002@yahoo.com.cn & f.wu@soton.ac.uk
Acknowledgement: This research is supported by the British Academy Larger Grant Scheme (LRG-37484) and research grant from Foundation of Urban and Regional Studies. Paper has been submitted to the Second Conference of East Asian Social Policy, University of Kent, UK, 30
th
Jun to 2
nd
Jul 2005.

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The new Urban Poor and Their Situation in Transitional China: Market Exclusion and Institution Isolation
Abstract: Since the early 1990s, while market transition of economic system in China has further driven rapid economic growth, a great number of industrial workers in the state sectors and collective sectors has been detached from the old planning system, and also been excluded from the newly labour market. Meanwhile, the rural migrants have become a vulnerable group in urban areas due to the persistence of the old institutions such as the hukou system (residence registration system). For the socialist China, institutional establishment and policy setting under market transition should to some extent help to protect the disadvantaged groups. So far, however, a societal security system and a uniform employment system have not been developed. The new urban poor have become increasingly noticeable in China. This paper explores the pauperization trajectory of the new urban poor, and examines the different predicament of two major groups of the new urban poor which are identified as the poor with urban hukou (the official urban poor) and the poor rural migrants with rural hukou (the unofficial urban poor). Specifically, it involves a comparative analysis of socio-economic status of two poverty groups. The findings suggest that, the official urban poor are from the inside of “the system”, and now are characterized by limited institutional dependency and market exclusion; the poor rural migrants are from the outside of “the system”, and now are further confronted with the institutional isolation and social exclusion in urban areas. Moreover, policy inequality existed between two poverty groups. While the survival and development problems of the official urban poor have been to some extent addressed, there is no formal policy concern about the subsistence conditions of the poor migrants. Keywords: The urban poor, Market exclusion, Institution isolation, China

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The new Urban Poor and Their Situation in Transitional China: Market Exclusion and Institution Isolation
Introduction Over the last two and a half decades, China has transformed itself from a centrally planned economy to a socialist market economy, from an agriculture society to an urban, industrial one. Last 25 years witnessed the compelling economic achievement and at the same time perceived the pressure of the emerging social problems in China. Especially since the early 1990s, under the background of establishing a socialist market economy and flourishing urbanization, social structures which is based on ‘two classes and one stratum’ (liangge jieji yige jieceng, namely working class, peasantry and clerisy) in China have changed markedly. Rapid economic growth was accompanied by a widening gap between the rich and the poor (Logan et al., 1993; Bian and Logan, 1996; Nee and Matthews, 1996; Wang, 2003; Zhou, 2000), and a trend of social polarization has appeared in urban China (Gu and Kesteloot, 2002; Gu and Liu, 2002). At the bottom of social class formation, the new urban poor have produced. On the one hand, the adjustment of sector structures and the reform of SOEs (state-owned enterprises) led to laid-off workers, unemployed persons, working poor and poor retirees. Majority of these people who are from the inside of ‘the system’ comprise a group of the official urban poor. On the other hand, while the relaxation of controls on population movement and the attraction of development chances in urban areas resulted in large-scale migration from rural to urban areas, the unequal policies correlated with the hukou system (residence registration system) restricted many rural migrants to low-paid work or being unemployed in urban areas. Plus the additional living cost, some of them live in the poor conditions (Zhu, 2002). They are from the outside of ‘the system’ and comprise a group of the unofficial urban poor, namely poor rural migrants. In transitional economies, the state policies and institutions and their consequences always deeply influence the natures and processes of some social problems (Fan, 2002; 2004; Chan and Zhang, 1999). Chinese new urban poor emerges under the market

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transition of economic system. Accordingly, a series of institutional transitions and policy adjustments following a socialist market economy have been regarded as the causes of new poverty generation in transitional China (Wu, 2004; Liu and Wu, 2004), and further influenced the socio-economic status of the new urban poor. In fact, discourses on new urban poverty have been initially produced in the developed market economy since the mid-1970s. The new urban poor in the post-Fordist western society mainly include poorly educated young people, long-term unemployed adults, employees in the informal sector, one-parent families, and migrants isolated from social networks (Badcock, 1997; Mingione, 1996). The prevailing structuralism interpretation is to treat the new urban poverty as an outcome of structural changes such as global economic restructuring and the post-Fordist transformation (Gans, 1993; Morris, 1993; Neef, 1992; Sassen, 1991; Wacquant, 1993; Wessel, 2000; Walks, 2001). The new urban poverty is generally regarded as a complex phenomenon caused by economic disadvantage and social exclusion (Mingione, 1993), and the exclusion from the world of regular employment and from mainstream society is the main feature of the ‘new urban poor’ in the post-Fordism western society (kempen, 1994). In term of the analytic framework based on three modes of economic integration which are market exchange, redistribution and reciprocity (Polanyi 1944, Harvey 1973, Mingione 1991, 1996, Kesteloot et al 1997), the social-economic status of the new urban poor in the advanced market economy is closely associated with economic restructuring, changes in the welfare state and the weakening of social networks and solidarity (Musterd et al., 1999; Mingione, 1996). Under the background of economic globalization and internationalization, the economic restructuring in advanced industrial countries begot the social (and spatial) polarization. While the ‘polarization theory’ (Sassen, 1991), the ‘mismatch theory’ (Wilson, 1987) and the ‘professionalisation thesis’ (Hamnett, 1996) distinctively describe the formation of social (or spatial) polarization, they all consider the impact of occupational restructuring or differentiated labour market on the polarized social structure, further pointing out the bottom socio-economic status of the new urban poor in the income and employment structure. In a word, high unemployment and low-paid insecure jobs are two major causes of new urban poverty in western countries,

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the unemployed and low-income workers in informal sector constitute the poverty poles of social class formation in western cities (Dorling & Woodward, 1996; Mohan, 2000). While emphasizing the polarization effects of global economic restructuring, the role of the welfare state in influencing the social inequality and social exclusion should not be underestimated (ref. Silver, 1993; White, 1995; Musterd and Ostendorf, 1998).The provision of the welfare state in many western countries has softened the consequences of socio-spatial polarization due to economic restructuring, and to some extent reduced the sharp division between various segments of the population (Musterd et al., 1999). However, Western welfare states have appeared difficult to cope with the growth in unemployment and the emergence of the new urban poor since the post-Fordism transition of society and economy in the mid 1970s. With the neo-liberal credo of less state and more market, the ongoing change in all western welfare states seems to be characterized by a reduction of welfare provisions. Since the late 1970s, welfare systems have been reformed in many western countries, and some innovative welfare programmes have been established, such as the ‘workfare’ in the USA and the ‘contractual involvement’ in some European countries (Popenoe, 1999). These changes in welfare systems have actually increased the restriction of welfare services and reduced welfare support for the poor. In addition, demographic change in western society is weakening the social networks and solidarity. Changing social values, which are represented by the process of women’s liberation towards family life and the process of secularisation towards religion in society, produce new household compositions (Musterd et al., 1999). The increase in the numbers of small single and two person households, childless or single-child families and the diminution of birthrate are the obvious demographic result of these changing values, which consequentially lead to the breakup and dissolution of families and the increase of fragile households. These demographic changes thereby result in the decrease significance of family and social networks, and further the increasing social isolation of the new urban poor such as lone elders, singe-parent families, singe youths and adults (Mingione & Morlicchio, 1993). Meanwhile, the large-scaled international migration is

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the other important demographic change (Musterd et al., 1999). Most of these international migrants which are thought to be low-skilled and unskilled comprise the part of the lower-end of the polarization scale in employment structure, contributing to the rising social polarization. In sum, the socio-economic status of the new urban poor in present advanced market economy is characterized by bottom or marginal status in labour market, limited welfare security and weakening social support network. While three modes to accessing resources have been integrated to analysis the life chances of the new urban poor, market exchange is on the dominative position since the labour market is regarded as the most important mode of integration in most cities in the advanced market economy (Musterd et al., 1999). According to the prevailing structuralism approach, the new urban poor in western society primarily have no or limited access to the labour market, which further making them vulnerable and being socially excluded. Gans (1993) pointed out that economic exclusion is something new in modern economies, and it is worse than social or institutional isolation because people are even deserted by their friends and relatives once they are totally excluded from the economy. Most of exiting studies on the new urban poverty and social exclusion examine capitalist market economies and emphasize the impact of economic restructuring and consequential economic exclusion through neoclassical and neoliberal theoretical approach which prioritize market over institutions. In fact, ‘economic restructuring mainly refers to processes that often go beyond the state level and increasingly operate on a global scale’ (Musterd et al., 1999). Under the different national background, the increasing studies argue that the state and its institutions ought to be on a central position in explanations of changing social structure and emerging social inequality (Skocpol, 1985; Almin, 1999; Jessop, 1999; Peck, 1994; Silver, 1993; Marcuse, 1996). Such debate has taken place in North American and Western European advanced market economy, ‘the disconnection of the debate from formerly socialist economies is especially troubling because it is in these very economies that the state’s role is most pronounced and changes of that role are most profound’ (Fan, 2004). So this paper’s premise is that, the state institutions play most powerful roles in the creation of the new urban poor, and influence the actual situations

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of the new urban poor in transitional China. In this paper, an institutional perspective is employed to analyze the generation of the new urban poor and their predicaments following a historic dimension. We argue that the creation of the new urban poor in China is close related with the institution transition and institutional continuance which are dominated by the developmentalist state. Especially, we focus on examining the different predicaments of two major new urban poverty groups which are identified as the poor with urban hukou (the official urban poor) and the poor rural migrants with rural hukou (the unofficial urban poor). We also argue that the different system-based origins of two new urban poverty groups cause their actual discrepant situations. Specifically, a comparative analysis for the socio-economic status of two poverty groups is addressed. The official urban poor are from the inside of “the system”, and now are characterized by limited institutional dependency and market exclusion; the poor rural migrants are from the outside of “the system”, and now are still confronted with the institutional isolation and social exclusion in urban areas. Such a comparative analysis contributes to measure the market mechanism and institutional forces which are related with the predicament of the new urban poor. This paper uses a combination of qualitative information from the depth-interviews of the urban poor in Nanjing city in 2004 and quantitative data from a survey of poverty households in Nanjing city in 2002. In next section, we identify two new urban poverty groups through qualitative analysis and use the quantitative data to generalize the composition of the new urban poor and poverty households. Based on this, I explore the pauperization trajectory of two new urban poverty groups, and articulate the different predicament of two new urban poverty groups. Then, I turn to analysis the empirical evidence based on the qualitative information from the interviews of poverty households in Nanjing. China’s new urban poor and its composition China’s new urban poverty which emerged under market transition is quite different from the pervasive poverty in the pre-reform period and the traditional urban poverty of the

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‘Three Nos’ (no relatives or dependents, no working capacity and no source of income) during the period of the socialist planned economy. In the pre-reform period, the Chinese economy experienced slow growth and even stagnation in the Cultural Revolution (1966-1976). Low living standard was a universal phenomenon. Despite differences between rural areas and urban areas, poverty was not a noticeable issue but a general problem in China, because living standards among ordinary residents was more or less the same. Since economic reform in the late 1970s, with the national economy developing rapidly and people’s living standard improving markedly, China has achieved a remarkable success in reducing poverty. According to income status, official statistics shows that the proportion of the population living in poverty dropped from 250 million in 1978 to 30 million in 2000 (SCIO, 2001). In general, rapid economic development was the primary factor in reducing poverty, and poverty reduction mainly produced in rural areas since the Chinese government paid more attention to rural poverty before the early 1990s. In contrast, urban poverty was still not considered as a social problem under the ideology of egalitarianism, while there have a small quantity of urban poor who are looked after by the Ministry of Civil Affairs. Furthermore, socialist urban policies contributed to decreasing income inequality and reducing the problem of urban poverty. These policies included: (1) a full employment policy; (2) comprehensive welfare benefits provided by work-units; (3) workplace-based housing allocation; (4) a state insurance system; (5) cheap or free urban public services. Although most of urban residents lived under conditions of material deprivation with low-paid jobs, they could enjoy basic education, public housing, and medical services. Only the ‘Three Nos’ were counted as the urban poor, which was a small group and known as the recipients of social assistance from Ministry of Civil Affairs (Chen, et al., 2004). Since the socialist market economy system was cultivated in the early 1990s, economic and social structures in urban China have changed markedly. An increasing gap between the rich and the poor produced (Gu and Kesteloot, 2002; Gu and Liu 2002; Wang, 2003). As the egalitarian situation has been broken, income differences among urban residents

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have gradually enlarged, with the Gini coefficient increasing from 0.16 in 1981 to 0.30 in 1988, then to 0.458 in 2000 (Wang, 2004). At the bottom of social class formation, the new urban poor have emerged. Firstly, changes in economic restructure, representing as the reform of SOEs (State Owned Enterprise) and the adjustment of sector structure under market transition, led to large-scale unemployed persons, laid-off workers, working poor in informal sectors and poor retirees in loss-making enterprises, which comprise the official new urban poor with urban hukou. According to the statistics of the Ministry of Labour and Social Security and National Statistics Bureau, there were 7.7 million persons registered officially as unemployed at the end of 2002, and the unemployment rate was 4.0%. At the same time, 4.1 million workers who were laid off by SOEs were registered in the Labour Redeployment and Training Centre (Wang, 2004). There still have a great number of unregistered laid-off workers and the unregistered unemployed. Furthermore, according to the statistics of the Ministry of Civil Affairs, the number of working poor, retirees, and their family members, who were the recipients of MLSP (the Minimum Living Standard Programme), was 15.35 million by July 2002. Majority of these people who are the former insider of ‘the system’ has come to the periphery of ‘the system’ and comprised the official urban poor. In addition, economic development is accelerating the population urbanization process. Large numbers of rural labourers are immigrating into urban areas with the attraction of development chances in urban areas and the relaxation of mobility control by the state. According to the Fifth Population Census, the number of rural migrants in the whole country reached 88.4 million. Although working in urban areas, they still retain their “peasant” status according to the hukou system. The unequal policies connected with the household registration restricted most of them to low-paid work or being unemployed in urban areas, and also made them bear additional living cost, which cause them subsequently trapping into poverty. Survey indicates that about 20 percent of rural migrants lived in poor conditions (Zhu, 2002). These poor migrants who are from the outside of ‘the system’ comprise the unofficial urban poor, namely poor rural migrants. Considering above two poverty groups, the size of the new urban poverty population in China is approximately 8-10 percent of total urban population. Owning to the lack of data

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on real income and an agreed poverty line, the size of the new urban poverty population cannot be exactly estimated, but only assessed qualitatively. Even so, it is certain that the new urban poor have a noticeable scale. In fact, the new urban poverty in transitional China usually presents the household poverty. Based on the above qualitative analysis and the survey
1
of poverty households in Nanjing city, these poverty households could be classified. A multivariate factor analysis is used to classify poverty households which are measured by 18 variables concerning household socio-economic and demographic characteristics. According to scree plot, three principal components with 48.613% of variance explained are chose. Meanwhile, we achieve a satisfied eigenvalues, with a cumulative contribution of 48.613% (Table 1). The model produces a clear structure of factors, as Table 2 shows its principle components matrix. According to the contribution of three principle components to the factors, three main factors are respectively conceptualized as: big households, rural migrants’ households and households with the head of laid-off workers or the unemployed persons. Component 1: Big households. This component became the most important factor, explaining 23.402% of all variables. 6 variables concerning household characteristics loaded high on it, all positively (Table 2). These variables underline a high accumulation
1 The survey was conducted in November 2002. As our target is the poverty group, we firstly select
the poor neighbourhoods based on the analysis of the official statistics in sub-district (jiedao) areas. In total, 16 typical neighbourhoods or residents’ committee (jumin weiyuanhui) areas are selected, which hold concentrations of MLSP recipients and the migrant populations. The target of the survey is the poverty group, although before actually conducted interview this might not be guaranteed. As a result, among the total of 503 questionnaires administered with face-to-face interviews in these selected neighbourhoods in Nanjing city, 432 households are qualified for analysis, according to income level and consumption status. This sample includes 1504 people in the urban poverty category, comprising 276 urban poverty households including 106 laid-off workers, 76 unemployed persons, 66 retirees and 28 poor workers, and 156 poor rural migrant households (Table 1). The questions in the questionnaires covered household socio-economic and demographic characteristics. The head of household or the spouse were interviewed.

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of big households in this group. As Table 2 shows, these households tend to have larger household size and more generations. Moreover, income and consumption expenses in these households are all higher, and the living space of these household is larger in contrast with other two groups, which reflect the basic characteristics of big households. According to our qualitative analysis and related interviews, we understand that these big households are mainly composed of those poverty households with the head of poor workers and retirees. The larger size of household, the lower income of the head and more dependents lead to the poverty of whole family. So this group is also called households with the head of poor workers and retirees. (Table 1) (Table 2) Component 2: Rural migrants’ households. This component accounts for 16.220% of the total variables. It mainly reflects 6 variables of the head of household’s characteristics and 2 variables of household characteristics. In terms of demographic information, Age, Gender (Male = 1, Female = 2) and Marriage status (Unmarried = 1, Married = 2) loaded negatively, which indicates that, most of these household’s head are young, male and unmarried. These demographic characteristics of household’s head are coincident with the rural migrants’. Furthermore, Job stability is also negatively loaded, showing their higher rate of job turnover. Higher individual income and more working persons, however, reflect the more active economic status of poor rural migrants’ households in contrast with the official urban poverty households. Concerning Living time and Housing sources (Purchased welfare housing = 1, Heritage private housing = 2, welfare housing = 3, public housing = 4, Rent housing = 5, Others = 6), these households lived in current neighbourhoods for a short time, and their housing is mainly from renting and other types, showing the instability housing characteristics of poor rural migrants. Component 3: Households with the head of laid-off workers or the unemployed persons. With a contribution of 8.991% to the explanation of factors, this component mainly reflects a total of 4 variables which are all concerning the head of household’s

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characteristics. Evidently these variables are mainly employment related, besides the variable of Educational level which indicates a higher educational level of this group as compared with the other two groups. (Former) Occupation variable (Government agency and political parties = 1, Enterprise or business executives = 2, Teacher and scientific researcher = 3, Technical professionals = 4, Individual and private owner = 5, Manufacturing workers = 6, Retailers and social service workers = 7, Informal employees and unemployed persons = 8) are positively loaded, indicating that this group is mainly composed of laid-off workers or the unemployed persons which are characterized by the former employment status in manufacturing sector or the current informal employment or unemployment status. This component is highly positively linked with the variables of (Former) Ownership sector (no unit = 1, Collective = 2, Stated = 3, Individual = 4, Private = 5, Foreign investment or Joint investment = 6) and Unit benefit, which validates that this group is primarily from the collective or state enterprises whose management benefit are worse in market transition. In sum, new urban poverty households in transitional China could be classified as aforementioned three types via factor analysis, which is nearly consistent with dichotomy of groups of the new urban poor. Essentially, no matter what is the analysis perspective, household or individual, new urban poverty presents the discrepancy between the official urban poor and the poor rural migrants since they are respectively from the inside and outside of ‘the system’. The official urban poor, who is protected by ‘the system’ in socialist planning era and enjoyed benefits such as job security, fixed pay and various types of occupational-based welfare, is keeping away from the core insiders of ‘the system’ under market transition. These laid-off workers, unemployed persons, working poor and poor retirees and their families are pushed towards ‘the market’ under the background of establishing a socialist market economic system. These peoples have formed an urban marginal group, which is coexisting and competing with the poor rural migrants (an urban vulnerable group) in urban environment. While these two poverty groups are all living in bad conditions, they are confronted with the quiet different predicament due to their different experiences.

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Market exclusion and institution isolation: the situation of the new urban poor Although new urban poverty manifest a different concrete forms in different social context, it can be in general regarded as the product of different ‘transitions’ in the political economic environment and consequently in social policy (Wu, 2004). In advanced market economies, new urban poverty is linked with the post-Fordist economic restructuring and the contraction of the welfare state. In transitional economies, new urban poverty is close related to the institutional transition and the simultaneous institutional disjuncture between the old welfare system and the new labour market (Liu and Wu, 2004, Wu, 2004). Concerning transitional economy, there still appears two approaches in the current practices and relevant studies. One is to link economic transition with ‘big bang’ (Roland, 2000), viewing the great changes in political system as its core and taking economic transition as only one aspect of the change. Eastern European countries and former-Soviet adopted this model. The other is to make market reforms of the economic structure as the central theme while retaining the socialist political system. China is a typical representative of this transition model. In two distinguishing transitional economies, while the emergence of urban poverty is accompanying with recessionary economy in Eastern European countries after the ‘shock therapy’ (Andrusz et al., 1996; Kolodko, 2000), China’s new urban poverty is increasingly noticeable in a period of rapid economic growth with a gradual reform. Therefore, we need penetrate the exterior impression of economic prosperity in transitional China to highlight the interior institutional transition and the changes in social policy which have de facto become the essential causes of new poverty generation. Since the economic reform in the late 1970s, especially the market transition of economic system in the early 1990s, the Chinese state has transformed itself form a socialist state to a developmentalist one (Woo-Cumings, 1999; Fan, 2004; Wang, 2004). While market logic was introduced to undertaking a transition from the central planning economy to a socialist market economy, “the state continues to be the ultimate planner that guides and regulate the economy” (Fan, 2004: 286). For advocating a strategy of economic pro-growth, institutional transition and the

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changes in social policy were designed not to chiefly serve the social development, but the enhancement of economic efficiency and the growth of the economy, which consequentially beget some social problems, unexceptionally including new urban poverty. From the institutional perspective and the historic dimension, the creation of two new urban poverty groups and their different plights are articulated in what follows. When the Chinese Communist Part came into power in 1949, they took a responsibility of reconstructing the national economy, which is based on a severely damaged economy and few or no modern industry. Industrialization, especially the development of heavy industries, was chose to be the basic strategy of intensifying the national strength. Moreover, a central planning system was adopted to implement the development strategy of preferential industrialization. With the basic idea of ‘production first and living secondary’, the setups of institution and social policy were considered to be supportive to industrial production (Li, 2004a), and further to the development of cities as productive site, which is represented by a centralized allocation policy of labour force, a comprehensive welfare system and a hukou system. First, “through ‘unified state assignment’, state agencies allocated jobs to school graduates and workers according to national development blueprints” (Fan, 2004: 287). Second, a comprehensive welfare system based on the work unit was established to give urban employees access to subsidized food, housing, education, healthcare and other social services. To guarantee these policies, furthermore, a hukou system was implemented in 1958 to institutionally divide China into two systems of the urban and rural sectors (Chan, 1994). The initial purpose of this institutional arrangement was to prevent labourers from migrating from rural areas and guarantee the scarce employment and related welfare to urban residents, essentially catering to the heavy industry-oriented strategy under the planned economy (Chan and Zhang, 1999; Cheng and Selden, 1994). However, although this socialist development strategy to some extent contributed to the industrialization process and the stability of socio-economic development, the absence of an efficient economic system resulted in slow economic growth and the universal social poverty due to going against the market principle and deviating from the globalized economy,.

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Since the late 1970s, the post-Mao developmentalist state in China has deserted socialist egalitarian ideology, and regarded economic growth as the chief objective, what is called ‘development is the basic principle’ (fazhan caishi yingdaoli). Opening-up and economic reform was carried out, gradually resulting in the changes in socio-economic structure. Two stages could be divided to distinguish the extent of economic reform and the scope of socio-economic restructuring. First era is from 1979 to 1992, and the process of economic reform in this stage is gradual. While the state tried to promote reforms in the industrial sector through encouraging the development of non-stated economic sectors such as individuals, joint ownership units and private enterprises, the state or collective sectors are still absolutely dominant in the national economy. Since the socialist planned economy system kept on its function over this stage, a full employment policy was still implemented to provide posts for urban labour forces, including a great number of newly increasing urban labour forces and the returned xifang populations. Although the non-stated sectors has recruited some labour forces, the public ownership sectors including state-owned units and collective-owned units still act as policy executors to provide job opportunities and undertake the comprehensive welfare functions for their employees (Stella, 2005). By 1992, the employees in state-owned units and collective-owned units numbered 145.1 million, highly occupying 92.8% of total urban employees (NBSC, 2000). The centralized allocation system of labour force, plus the attraction of enjoying the comprehensive welfare as the employees of the stated sectors, led to enormous redundancy in SOEs and COEs (collective-owned enterprises). As a result, while gradual reform has led to the development of diversified economic elements and subsequently produced a steady economic growth, tremendous economic losses in SOEs and COEs were inevitable. In addition, industrialization in rural areas since 1984 became the primary measure to take over the great number of agricultural surplus labours resulted from rural economic reform. However, from 1989-1991 the scale of township and village enterprises was curtailed due to the policy regulatory of the national state, further leading to the decreased employment in these enterprises. Meanwhile, the relaxation of labour mobility and the marketization reform of food, housing and employment provide the rural

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migrants the survive chances in cities. Enormous rural labours have floated into urban areas to seek jobs and make a living since 1989. By the end of this stage, the group divisions between different social groups have developed. As the insider of ‘the system’, those who are employed in public ownership sectors continue to enjoy benefits that were available in the pre-reform period, such as job security, fixed pay and various types of occupational welfare (Li, 2004b). In contrast, the outsider of ‘the system’ including the employees in non-stated sectors and peasant workers did not have any social protection. However, due to the stable economic growth and the gradually prosperous tertiary industry in urban areas, these outsiders of ‘the system’ could obtain the employment opportunities and income sources, and few of them are confronted with the poverty. Meanwhile, the traditional urban poor, which are composed of ‘Three Nos’, are attended by the Ministry of Civil Affairs. Urban poverty in this stage was not a noticeable social problem. Since 1992, the objective of economic reform in China is to develop a socialist market system to join the globalized economy and maintain the rapid development of the national economy. The market transition of economic system means that Chinese economic development should be mainly conformed to market principle. Consequentially, Chinese public ownership enterprises including SOEs and COEs are exposed to increased market competition from domestic and foreign enterprises. However, under the long-term effects of the traditional system and historical problems, many public ownership enterprises were lacking in both flexible management mechanisms and technology innovation, and were often burdened by the duplicated industrial activity, heavy debt and surplus employees, further facing operating problems, negative profits and poverty of employees. In the cruel market competitive environment, most of them were confronted with bankrupt or closing down if completely following the market rule. China is a socialist country, and the premise of retaining a socialist system is insisting on the primacy of public ownership. Therefore, since the objective of developing a socialist market system was established in the early 1990s, the state has initiatively implemented the market-oriented enterprise reform in order to ‘save’ these public ownership enterprises, especially the medium and large SOEs. The purpose of enterprises

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marketization is to transform the management mechanisms of public ownership enterprises, specifically turning them into independent legal persons and entities in market competition that have autonomy in business operation and are responsible for their own losses and profits, bearing their own risks and self disciplined. Consequently, public ownership enterprises in China experienced an unprecedented large-scale restructuring through explicitly putting forward a strategy of “grasping the major while deregulating the minor” (Zhuada Fangxiao). The reform was incipiently put into practice in COEs and medium and small SOEs, and most of them was deregulated and tried to transform the ownership and management mechanism through ‘closure, transformation, consolidation and stop’. By the end of 2001, 81.4 percent of the state-owned medium and small enterprises conducted ownership transformation, and 51% of them assumed the share-holding system and equity joint-venture system (China.org.cn, 2003). Furthermore, reform of large SOEs has also implemented since 1995. ‘Downsizing in the interest of increased efficiency’ (jianyuan zengxiao) has become the major feature in order to achieve economic efficiency and to compete with other new forms of economies at the same level. As a result, the proportion of employees in public ownership units in overall economy has decreased sharply. The percentage of employees of state-owned units in urban employed persons has a great extent drop from 63.2% in 1992 to 59.0% in 1995, then to 28.9% in 2002. The employees in state-owned units and collective-owned units have respectively decreased from 112.61 million and 31.47 million in 1995 to 71.63 million and 11.22 million in 2002. It was estimated that, from 1995 to 2002, an average 5.0 million workers per year were laid off due to SOEs’ and COEs’ reform (Lu, 2004). Although the non-stated sectors, as an important component of China's socialist economy, have achieved a great progress, and the number of its employees in urban areas have increased from 11.2 million in 1992 to 68.53 million in 2002 (Qian, 2003), these non-stated sectors could not recruit such a great number of laid-off workers from public ownership enterprises. Consequently, many laid-off workers became unemployed and fell into poverty due to lack of regular income. Number of registered unemployed persons in urban areas has increased from 3.64 million in 1992 to 7.7 million in 2002, and registered unemployment rate in urban areas has also

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increased from 2.3% in 1992 to 4.0% in 2002. Unemployment is the direct cause of urban poverty. These laid-off workers and unemployed persons have experienced the status transformation from the insider of ‘the system’ to the outsider of ‘the system’ or strictly to the periphery of ‘the system’. Most of them comprised the main body of official new urban poor. These new urban poor are now confronted with double negative effects from market and institution, which are primarily presented as the exclusion of labour market and limited welfare dependency. Firstly, the centralized allocation system of labour forces has been gradually dismantled since developing a socialist market system, and a full employment policy has also been canceled. These victims who are laid-off or dismissed by SOEs and COEs are pushed into the newly labour market. While the government has adopted a series of re-employment measures, such as the re-employment training and loan support for individual occupation creator, to resolve the employment of laid-off workers, the results are not satisfactory (Solinger, 2002). Many laid-off workers do not have a positive attitude to the re-employment measures. On the one side, many of them lack competitive advantages in the employment market as being older and having only low-level education and low skills due to old employment training system. On the other hand, they have no enough capital to embark on individual or private enterprises due to their long-term low pay in the public ownership sectors. These new urban poor are incapable of entering into the labour market, which result in the lost of income. Lack of stable income resources, it is difficult for them to escaping from the poverty trap. Secondly, while the work-unit-based welfare system is gradually being dismantled, the societal welfare system has not yet been developed. The official new urban poor only depend on the limited welfare security. Solinger (2002) argues that, while rampant economic reforming and enterprise dismantling has decimated a great proportion of the old state sector and the work posts it supplied for decades, there are no welfare net to maturely catch the discarded as they are pushed aside. To cope with increasing lay-offs, unemployment and new urban poverty, many cities have set up a three-tier safety network based upon three programs in the late 1990s, including the Labour Security Program, the

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Unemployment Insurance Program and the MLSP for urban residents. However, the standards of these programmes are relatively low, and their coverage is still too narrow to include all of the new poor. The Labour Security Program only ensure basic living expenses for recently laid-off workers through a monthly or yearly pension contributed by the enterprise pension fund, and the Unemployed Insurance Program managed by re-employment centres only supports those laid-off workers who are seeking for jobs. So both the programs only benefit those workers who have contracts in the formal sector, and have nothing for the unemployed, poor workers, or retirees. Even so, the pension of average 270 Yuan (32.5 USD) cannot enable laid-off workers to lead a decent life. Moreover, many laid-off workers either cannot receive a timely pension due to lack of funds in some enterprises, or cannot obtain pensions from their closing enterprises. Since the mid-1990s, the MLSP has been set up and covers more and more urban poverty households. Unemployed persons, laid-off workers, poor workers, retirees and their families are now main recipients of this programme. The minimum living standard has in fact been taken as the absolute poverty line despite no poverty line accepted by the government. In the light of the different circumstances prevailing in different cities, the minimum living standard varies. However, the standards in all cities are only kept at subsistence level, from 143 Yuan (17.2 USD, in 2002 in Nanzang) to 344 Yuan (41.4 USD, in 2002 in Shenzhen), respectively equal to the 21.8% and 15.6% of the per capita income of two cities, which means that large numbers of households surviving on incomes near or above this line are not covered. According to Ministry of Civil Affairs of China, there are only 19.3 million recipients of the MLSP, approximately 4.0% percent of the total urban population, which is far lower than the aforementioned scale of the new urban poor. As the final ‘safety net’ for maintaining the minimum living conditions of urban residents, the standard of the programme is low and its coverage is narrow. Therefore, due to the relatively low level of support, it can only partially alleviate urban poverty. Additionally, coming into 1990s, the number of rural-urban migrants has increased rapidly with the attraction of more development chances and better living style in urban areas. According to fifth population census, 88.4 million people migrated from rural to

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urban areas (NBSC, 2002). However, although the Chinese government has relaxed its control over population mobility within the country, the hukou system in the urban areas remains essentially unchanged (Wang, 2004). There are still many obstacles to breaking the hukou system, which continues to be a strong institutional restriction on rural-urban mobility. As the aforementioned, China in pro-reform is a productive society with the development strategy of preferential industrialization. The development of cities as the productive site dedicated to the infrastructure construction which settled for the industrial production. Social services were organized by the work units, and the development level of social utilities is very low. Even in post-reform period, the developmentalist state emphasized the economic growth and the economic efficiency. The development of social utilities is sluggish, which only guarantee the normal operation of cities and meet the basic living need of urban residents. Regarding the healthcare, the hospitals per 10,000 persons even decreased from 0.66 in 1980 to 0.50 in 2003, and number of hospital beds per 10,000 persons increased slowly, only from 20.1 in 1980 to 23.4 in 2003. As for education, numbers of second schools and primary schools per 10,000 students decreased respectively from 22.0 and 62.7 in 1980 to 9.3 and 36.4 in 2003, and student-teacher ratio of primary schools also decreased respectively from 26.6 in 1980 to 20.5 in 2003, and the ratio of secondary schools only increased from 17.9 in 1980 to 18.9 in 2003. In addition, percentage of households with access to tap water slowly increased from 81.4% in 1985 to 86.2% in 2003, and percentage of households with access to tap gas increased from 16.8% in 1980 to 76.7% in 2003. In this context of lack of urban utilities, while the need for low-cost labourers from the rapid economic growth and prosperity urban construction has resulted in enormous rural-urban migrants, urban government is incapable of providing all of them the coequal urban services and the equal civil rights in cities. Furthermore, the increasing laid-off and unemployment put pressure on the city government to adopt a policy of restricting migrant workers to various sectors. All of these contribute to the retainment of the hukou system to divide the urban residents and rural migrants. According to the criterion of fifth population census, those who live in the urban areas for more than half one years, and those who live in current communities for less than half one years but leave their places of registration to live in urban areas for more than half one years, are counted as the urban population. However, while a minority

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of migrants did become official urban residents as a result of state acquisition of their land or purchase of ‘blue-seal household registration’, millions of rural migrants who have been counted as the urban population are not considered as official urban residents. They can not get urban hukou and are thus excluded from regular urban employment market and urban services. Without the stable income and necessary social security, many rural migrants in the informal labour market fall into poverty. In a word, the poor rural migrants are subjected to the dual disadvantage, institutional isolation and the subsequential social exclusion, which lead to the underclass status of poor rural migrants in urban areas. Firstly, poor rural migrants are institutionally excluded from the regular urban employment and are thus restricted into some sectors. So far, a uniform and open labour market is not developed in urban areas. To alleviate employment pressure from the increasing laid-off and unemployment, quotas have been set by most cities to limit the employment of rural workers (Lee, 2001). Employers will be punished for violation of these rules. Rural migrants are strictly excluded from some formal and steady occupations. Without access to these jobs, rural migrants can only undertake the hard, dangerous and dirty labour-intensive works (Wang, 2004). As a result, the employment of rural migrants is typically informal, low quality and unstable. However, while the employers use short-term contracts to limit their responsibility for welfare provision, rural migrants’ institutional and social inferiority, and severe employment competition in urban areas, leave them with few options other than to tolerate these toilsome and low-paid urban jobs (Fan, 2004). Consequently, many rural migrants get the low and unstable income, living in the poor conditions. Secondly, poor rural migrants also face subsistence hardship in the cities as they are denied access to civil entitlements. Although rural migrants are permitted to work and live in cities, they are still treated as peasants (Ma, 2002; Fan, 2004). While the movement of rural labourer into urban areas is the rational result of urbanization, they have not obtained relevant institutional rights to enjoy the urban services due to their rural hukou status. They have to pay extra costs for housing, cost of living and their

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children’s education because of various restrictions. Take housing for example, since majority of rural migrants can not afford the commodity housing in housing market, the rural migrants have to pay for renting private housing due to no right to live in the subsidized social housing. Regarding the children’s education, rural migrants must pay the additional fees, what is called ‘fees for debit study’ (jiedufei). In addition, poor rural migrants are not covered by the urban welfare system. The traditional welfare system mainly served urban residents, and the ongoing reform of the social welfare system still bypasses the rural migrants. Furthermore, rural migrant households are often isolated by urban society because of limited access to urban social services and the lack of social ties. Their only security is agricultural land leased from local government under the land contract (Tudi Chengbao). Once they lose both their leased land in rural areas and employment opportunities in urban areas, they are very likely to fall into poverty. All of these negative factors have made poor rural migrants become a vulnerable group characterized by unstable employment and poverty living conditions; a group earning the simplest living through the hardest work; and a group suffering discrimination everywhere just because of their rural hukou. Evidence from Nanjing Survey From the institutional perspective and historical dimension, the creation processes of the official new urban poor and poor rural migrants and their situations have been analyzed. In order to validate these interpretations and further present the actual conditions of two new urban poverty groups, we examine quantitative and qualitative data drawn from two surveys of poverty households in Nanjing city. One survey is conducted in 2002 (see the aforementioned footnote), the other is funded by British Academy and conducted in 2004. In the second survey, we conducted the in-depth interviews with 20 official urban poverty households and 15 poor rural migrants’ households, and the interviewees are the head of households or spouses. Interviewees were reached through institutional channels as welfare offices and the residents’ committees (the neighbourhood organization). The goals of the interviews are to examine the pauperization processes and trajectories of the new urban poor and compare the situations of two new urban poverty groups.

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Interviewees’ responses are in the form of narratives and are concerned with background information, household life conditions, the process and trajectories to poverty, and the subsistence and development strategies etc. The narratives were transcribed word for word, which contribute to provide the rare original qualitative data to apperceive the pauperization experiences of the new urban poor and their actual conditions. The empirical part of this paper is deployed along the life trajectories of the new urban poor. Nanjing city is selected because, as the capital of Jiangsu province, it was a major industrial city in the socialist era and is now experiencing economic restructuring. Like other cities in the coastal region where the impact of globalization is particularly evident, Nanjing could be a typical city to shed light on the general phenomena of new urban poverty which emerge in current China. Through narratives of the new urban poor, the pauperization experiences of two new urban poverty groups and their actual situations are examined. The former units’ employees and farmer inside ‘the system’ China has been institutionally divided into two systems of urban and rural sectors through introducing a hukou system since 1950s. ‘Urbanite’ (shimin) and ‘peasant’ (nongmin) respectively became the identity label of those who have the household registration in urban areas and in rural areas. In the central planning system before 1978, urbanites were arranged into work units in urban areas, and peasants were organized into people communes in rural areas. According to a centralized allocation policy of labour force, young labour forces in urban areas were directly allocated into enterprise units after graduation from high school. A laid-off worker recollected his employment experience to us: Before laid-off, I am a welder of one chemical plant. … In the past, the state took the responsibility for allocating jobs. After graduation (from high school), I was assigned into this plant, working while apprenticing. I didn’t change my job until laid-off last year.

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On the other hand, the laggard industrialization and city development in pre-reform period can not produce a great need for labour forces. The newly increasing labour forces in urban areas could not be fully employed. Solving the employment problem was regarded as one of reasons, a policy of going ‘up to the mountains and down to the countryside’ (shangshan xiaxiang) was carried out during the late 1960s to force millions of urban youths to be rusticated and reeducated by the peasants in rural areas. In that year, the state arranged ‘literacy youths’ (zhishi qingnian) to go down to the countryside. ‘Old three grades’ (laosanjie) graduated from high school in 1966, 1967 and1968, all went to countryside in response to the policy. The succedent three grades in 1969, 1970 and 1971 were all directly allocated into factories. … In this context, peasants were strictly retained in the rural areas to embark in farming. People communes, as the basic institution of countryside, took the responsibility for organizing farmers to participate in the collective farming. The land is collective-owned. Farmer could get ‘the score of work’ (gongfen) through collective farming. According to gongfen, they could get grain ration. These one to two generations’ farmers who embarked in farming in pre-reform era seldom left countryside and agriculture. Strictly speaking, they were also belonged to the insider of ‘the system’. What is different is they are inferior and can not enjoy the privilege of urbanite under the background of emphasizing on the preferential development of city-based industries. In the whole China of that time, all of people were allocated in the relevant post. They were not treated as individual but the part of collective under the centrally planning system. Peasant workers outside ‘the system’ and enterprises’ workers inside ‘the system’ ‘The united production and consumption in units or collectives’ (daguofan) under the equalitarian ideology in the pre-reform period has resulted in the lower positivity of producers and lower efficiency of production. The reform is necessary. In the earlier decade after reform, the gradual and experimentation reform are implemented from the

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periphery of ‘the system’ (Li, 2004b). The reform in rural areas was pioneer, and the household responsibility was introduced to dismantle the collective agriculture production of communes. The farmers who were disengaged from the collectives gradually became the outsider of ‘the system’. On the other hand, they got the use right of farmland through chengbao, which is allocated primarily according to household size. However, the improvement of agricultural productivity and the large-scaled growth of population in rural areas exacerbated the problem of surplus labor that had been hidden in the form of underemployment in former communes (Fan, 2004). By the late 1980s, along with the market reform of corn currency system, some peasants began to flow into cities to seek employment and make a living. An Anhui man left his village in 1989 to be a casual worker in cities when he was 18 years old. He came to Nanjing city to collect waste 7 years ago, and now rent a room in an ‘urban village’ with his wife and two little children: I have one sister and four brothers. The oldest brother died of an illness when he was 20 years old, and soon my sister left our family because of getting married. … We, three brothers, help our parent to farm. The farmland in my village is little. My oldest brother can take care of farming, my older brother and I came to cities to make a living. … Meanwhile, the national economy and urbanization has developed rapidly. Labour-intensive industrialization and urban development at low cost produced a great need for the cheap labourers. It appeared that, the migration of rural labourers into urban areas was not only the result of ‘push’ from the rural areas, but also ‘pull’ from the urban areas. In this case, while these earlier peasant workers were denied to urban entitlements, they could obtain the employment chances and live in the cities. As a result, their living conditions were not bad. A 36-year-old Shandong man, who works as a dustman in Nanjing, comments: At the very start (about the late 1980s), few peasants came out [to work]. At that time, there were also few of laid-off workers [in cities]. Urbanites are unwilling to

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do those dirty and hard works. Our peasants are rough. So it is easy for me to get this job. I got a good pay. Subtracting the living expenses, I still saved some money. But now it is different … In addition, the reform in urban areas also started from private sectors since the early 1980s. While the state permitted the private enterprises such as the self-employed individuals and joint ownership units to develop, the stated sectors including the state owned sectors and the collective owned sectors were still in the dominant position. Some employees in state-owned sectors had left their employment units to be in business or to work in private enterprises in order to get the high income or to pursue individual value. Majority of employees preferred to stay at state-owned sectors to continue to access to the benefits as the insider of ‘the system’ because the socialist planning system was still functioned at this stage. After his work-age was bought through money compensation (maiduan) since 2003, a 42-year-old man has become the unemployed. Before that, he was a salesman of a stated-owned department store. After I graduated from senior high school in 1979, I waited for job (daiye) at home. Three years later, I was recruited into my father’s unit through substituting his post (dingzhi). …I lived together with my parents before marriage. When I get married, the municipal housing bureau allocated this housing to us, and the rent is very low. I got the regular pay. Our living conditions are not bad. But since laid-off, our living has been from bad to worse. … These interviewees’ experiences indicates that, although the gradual reform in China since the late 1970s has led to new economy styles and the emergence of some new social groups in urban areas, such as the employees in private enterprises and peasants workers, the core of the economy remained unchanged in the 1980s (Li, 2004b). The public ownership was still in the predominant position, and the employees in state-owned sectors including SOEs and COEs comprised the main body of urban employees. In china’s cities at this stage, majority of urban population had a steady living and still enjoyed the comprehensive welfare security. Urban poverty was not noticeable during the

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period of carrying out the planning system. Limited welfare dependency and Market exclusion as the marginal group of ‘the system’ Establishing a socialist market economic system since the early 1990s has become the objective of marketization reform of Chinese economic system. The old style of socialist economic planning has given way to a Chinese-style socialist market economy (Wang, 2004). The reform further came down to public ownership sectors, which is the core of ‘the system’. The COEs and medium to small SOEs firstly were pushed towards market to be faced with the competition from private enterprises, which urged most of them to transform the ownership and management mechanism through ‘closure, transformation, consolidation and stop’. In this context, many employees in these enterprises lost their jobs and regular income. A laid-off worker who worked in a collective enterprise for 16 years now does the casual job to make a living: I was allocated into this plant in 1980. … In 1996, our plant stopped to produce. We, all of workers, went back home and had nothing to do. In fact, our plant had become to the bad since 1992. From then on, our salaries have been delayed. Until bankrupt (of this plant), we still did not get our salaries. … Since the Ninth Five Year Plan (1996-2000), reform of large SOEs has also been carried out to achieve economic efficiency and to compete with other new economic sectors. Following a capital-intensive approach for upgrading technology and production equipment, ‘downsizing in the interest of increased efficiency’ (jianyuan zengxiao) has become the major feature of reform. As a whole, the number of employees in public ownership enterprises has been decreased to a great extent. A 51-year-old man became an earlier retiree in 2003: I have worked in this factory for over 30 years. This factory was fairish before, but it became from bad to worse several years ago. The state-owned enterprises are all the same. … Our plant is not a small enterprise, and has over 2,000 workers. In

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December last year, out plant was merged into another enterprise. Majority of workers were laid-off. … From planning to market, the marketization reform of economic system has influenced millions of industrial workers who were the insider of ‘the system’ under the centrally planning economy. To avoid the potential social turbulence due to the large-scale unemployment, the state tried to finish the transition from the laid-off to unemployment through establishing the ‘reemployment centre’ since 1999. The bulk of laid-off workers were arranged into the centre in principle. Those laid-off workers in center can enjoy the basic living subsidy, and receive the relevant reemployment training. Three years later, if these laid-off workers still cannot get job, they will leave the center. A policy has been implemented to transform the status of laid-off workers into two types since 2002. If a worker has worked in unit for less than 25 years, his or her working age will be bought in a lump through money compensation (maiduan). Then they will disengage from units and enter the market. For those workers who have worked in unit for more than 25 years, they will be earlier retired, but get a little wage according to unit’s profit or not, and the units take responsibility of paying the endowment insurance fund for them. However, all of these policies are not satisfactory. A 40-year-old woman who has been maiduan in 2002 now maintains her living through doing some casual jobs: I entered the [reemployment] centre after laid-off in 1999. In the center, we are demanded to take part in a training course for reemployment. The course instructed us to create job chances by ourselves, for example becoming the boss. We are all low-quality and have no money, how can we become the boss. … A 47-year-old man who was a worker in a collective enterprise before was earlier retired in 2002, and now makes the living expenses through peddling: … My wife and I worked in a same unit. Several years ago, our plant went flooey. We all were laid-off and only got over 100 Yuan (about 12 USD) for living expenses. Afterward, we entered the center. We can get over 200 Yuan for basic

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living expense, it is not bad. …but, in 2002, my wife was maiduan. She got about 4,000 Yuan for compensation. The standard is that one year working age can get one month average salary. The average salary of our plant is 360 Yuan, my wife’s working age is 12 years. So she got only this money compensation. Our unit can not make a good profit, so the average salary is lower. … I have 23 years’ working age. The unit gave me a special treatment because my household is poor. I was considered as an earlier retiree so that the unit helped me to pay the endowment insurance fund, but I can not get the salary from unit. … The compensation expense is too small to afford our living expenses. … Through symbolistic money compensation, majority of laid-off workers have been pushed into labour market. The limited money compensations were not enough to maintain the basic living expenses of their households, which demanded them to seek job opportunities in the new labour market. However, these laid-off workers have lost the advantages of age, and the bulk of them are low quality. They are usually excluded by the new employment market. A laid-off worker was very disappointment to tell us: … I only finished the junior high school. At that time, senior high school is not popularization, we all only got the education level of junior high school. Now it is different, and most are graduated from senior high school or university. … After graduation, I was allocated into the factory until laid-off. In unit, I am only a general worker. Now I am laid-off, low educational level and unskilled, it is difficult for me to get a new job. … To this 48-year-old unemployed man, who has stayed at home for two years since maiduan, the reemployment is not optimistic as well: I extremely want to find a job, but it is very difficult to get one. Now many enterprises want the youth. … Even if some small enterprises would like to employ me, they ask me to work too hard. I am too older to endure it. For us, low-quality workers, if you are beyond 40 years old, it is difficult to find a proper job. … I seek

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job all the time in the labour market and talent market, but no units would like to employ me. … From the insider of ‘the system’ to the outsider, these laid-off workers and the unemployed have been gradually pushed towards the newly larbour market. However, the bulk of them can not be taken over by the market. Many of them lost the regular income because they are unemployed or do some casual jobs, which led to their household poverty. According to our survey of poverty households in Nanjing in 2002, per capita household income per month for the official urban poverty households was only 228.07 Yuan, which is only equal to 30% of the average of Nanjing city. The government has set up the MLSP since 1999 to provide the absolute poverty households with the basic living expenses. The welfare policy is also not satisfied because of its low standard and coverage. An 40-year-old unemployed woman, who was manduan two years ago, described her experience of applying for the minimum living expenses (dibao): I am divorced, now live by myself. Two years ago, I am unemployed. Until now, I can not find a formal job. I have no other way except for applying dibao. At the very start, it was difficult to get it. The director of residential committee said: “There are too many applicants. You are still young, you should go to work”. I also want a job, but I can not find one. … The current director is very nice, she care about our poor. So I got the dibao this year. … We, these recipients of dibao, only get 220 Yuan for living expenses, still need to do some compulsory work for the residential committee. If I can find one job, I don’t want to eat dibao. … A 45-year-old single man was laid-off in 1993 and got a 200 Yuan living expenses. His father was dead when he was young. He lived with his mother. In 2002 he was earlier retired. The unit and he take responsibility for paying his endowment insurance fund together. Now he and his mother only live on his mother’s pension: … I am ill and can not do those hard works, so I can but stay at home. The only income of our family is my mother’s pension, about 500 Yuan per month. I still

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need pay part of endowment insurance fund for myself. … So I want to apply dibao. But the residential committee did not approve. Because the standard of dibao is that per capita household income per month is less than 230 Yuan, we are not qualified. … But mother’s pension is actually not enough for our living expenses. What can I do is only to continue applying dibao. … In short, the official urban poor are not only exclude by the newly labour market, also are placed in the predicament of limited welfare dependency. Even so, the poor rural migrants’ situation examined in what follows will manifest their much more disadvantage, especially at institutional and social aspects. Institutional and social isolation as the underclass Coming into 1990s, population urbanization sped up. Not only due to the laour surplus in rural areas, the drop of agriculture comparative profit and the higher income in urban areas has caused more and more peasants to flow into cities. While most of the rural migrants have de facto worked and lived in urban areas, they have not obtained reasonable institutional rights to live in urban areas and are denied access to some urban entitlements due to their rural hukou status. Firstly, being faced with the pressure from the large-scale laid-off and unemployment, local urban government has set up some quotas to restrict rural migrants’ employment. Rural migrants were discriminated in urban employment environment. A 36-year-old Shandong woman came to Nanjing to do casual jobs with her husband 4 years ago. They rent a 6 square meters’ room to live with two little children: … My husband is a dustman of this residence. He can get 300 Yuan per month. But this little income is not enough for living expenses. So I put a booth along the street to sell vegetable, earn five to six Yuan per day. One month ago, my booth was confiscated by shirong. Local people (urban population) also put the booth, they are permitted. But it is forbidden for our peasants. … I have nothing to do now …

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To a 40-year-old Anhui man, the similar experience was complained: Several years ago, I came to Nanjing and helped one restaurant to deliver goods with tricycle. One time, on my way of delivering goods in Xijiekou (town centre of Nanjing), shirong sequestrated my tricycle and amerced me of 100 Yuan. I don’t know why. … Local people can do, we (peasants) cannot. … No other way, I can only be a stevedore in wholesale market. … The rural migrants can not get the impartial treatment institutionally in urban labour market. Due to lack of institutional security, plus the individual low-quality and the pressure from urban large-scale unemployment, many of them can only embark in the dirty, hard, dangerous and heavy manual jobs, and are often unemployed. As a result, they only get an instable and low pay. According to our survey in Nanjing in 2002, average personal income per month of the poor rural migrants was about 500 Yuan, which is lower than 540 Yuan of the lowest wage standard of Nanjing city. Per capita household income per month was only about 270 Yuan, which is a little higher than 30% of Nanjing average. Except for their low income, the poor rural migrants are still subjected to pay extra cost for living in cities without local hukou, primarily including rent, filial education fee and medical fee. One Henan man and his wife are all dustmen of one neighbourhood, they rent a room to live in cities for about 8 years with their 15-year-old daughter: We got this job through acquaintance. … It is too hard, but we have no choice. Now it is difficult to find a job. … We can earn about 800 Yuan per month together. But our expenses are higher. We need pay 150 Yuan for renting this room, only 10 square meters. … Our daughter goes to school in this sub-district. Without local hukou, we need pay extra fees for her study here, 500 Yuan per annum. … She will go to high school next year. By that time, we can’t afford for her education fee, because it is 6,000 Yuan per annum. We will send her back to countryside… Education fee is a big burden for poor rural migrants. Therefore, most of rural migrant’s

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households prefer to leave their children at countryside to attend school. An Anhui man told us: “I and my wife all collect waste here, our son were left at countryside with his grandmother. I have no choice, we can’t afford for his education fee here. ” In addition, medical fee is another extra cost for these poor rural migrants. To one Jiangsu couple who puts a booth and collects waste sometimes, child’s medical fee is their biggest expense: … My son is only 5 years. He often falls ill. Because he is a child, you can only take him to go to hospital to see a doctor. We are different, we are adult. If we are ill, I only buy some medicine to eat. …Every time, we need pay several hundreds Yuan for curing our son’s ill. …We are different from the urbanite. They have healthcare subsidy. … Furthermore, unlike the urbanites, the poor rural migrants can not get any welfare security and become the vulnerable group outside ‘the system’. A short-time unemployed Shandong woman, who done the casual jobs before, expressed her dissatisfaction: … We are peasants, so the [urban] government does not take care of us at all. They only care about urbanites, nobody think of our life and death. If urbanite is laid-off, he [or she] can get living expenses. Moreover, the urban poor can also eat dibao, we [peasants] have nothing. … We have been accustomed to these. In countryside, we get few of concern from the government. So in cities, we do not expect these. … Moreover, the poor rural migrants are also isolated by urban society. Urbanites do not regard the rural migrants as the part of urban population, and are unwilling to be close to them. The behaviour and habit of peasants usually are looked down by urbanites. Therefore, the bulk of the rural migrants are subjected to social discrimination and social isolation. They comprised the underclass of urban society. Three Anhui sisters came to Nanjing to be the mending sewers along street 3 years ago. They rent an 8 square meters’ room together in an urban village where over 70% of total population are rural migrants. The biggest sister poured out their misery:

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Our household is poor in rural areas, so we can not go to school. … In this [urban] society, illiteracy is pity. If you have no literacy, you can only do some casual jobs in cities. … We, peasants, are poor. Because we wear worse, and our skin looks blacker due to hard work, urbanites do not want to contact with us. They look down on us. … We prefer to rent a room here because majority of population here are from countryside. We seldom contact with urbanites except for making a deal with them. … Likewise, other peasants also comment that, it is difficult to communicate with urbanite, and their social network in urban areas usually is composed by the original villagers and fellow peasants’ workers. In fact, the poor rural migrants have become an underclass which is isolated by institution and also is excluded by urban society. Conclusion Chinese new urban poverty emerges in a period of rapid economic growth under market transition. This is quite different from other transitional economy in Eastern Europe where the recessionary economy led to the degradation in living standards of the common people, also in contrast with the developed countries where the poverty generation is mainly caused by economic restructuring, contraction of the welfare state and the weakening of social networks and solidarity. Chinese new urban poverty is de facto rooted in the institution setups during the period of centrally planning system, and is close related with the institutional transition and institutional successiveness under market transition. So I have argued in this paper that an institutional perspective and historic dimension ought to be adopted to examine the pauperization process and trajectories of the new urban poor and their actual situations. It has been indicated that a developmentalist state in China has chose a gradual reform to actualize the dual objectives of economic growth and the market transition of economic system while retaining a socialist political system. In this case, while the reforms in employment policy and welfare system are implemented to follow the market principal, the reform of SOEs have to be driven by the state to make them survive in the drastic market competitiveness in order to retain its dominant position in the national economy, which led to large-scale

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laid-off and unemployment. On the other hand, the pressure from the laid-off and unemployment and from the lack of social utilities in urban areas produce the exclusion for the migrants through maintaining hukou system which is the institutional foundation to result in the disadvantage of the rural migrants. In a word, the generation of new urban poverty in China is social cost this country has to pay for its historic overstocked social problems. The new urban poor are a disadvantaged group in that they are discarded by the former socialist comprehensive welfare system and also are marginalized by the new employment market and the societal welfare system. According to the hukou status, two new urban poverty groups are identified as the official urban poor and the poor rural migrants. Difference of identity (or socio-economic status) decides the discrepancy in the pauperization experiences and the actual situations of two poverty groups. The official urban poor, which is composed of laid-off workers, the unemployed, working poor and poor retirees, are former insider of ‘the system’ and enjoyed the socialist benefits during the centrally planning system, such as job security and the comprehensive welfare (Li, 2004b). The marketization reform of the public ownership sectors since the early 1990s have transformed their socio-economic status from the inside to outside of ‘the system’. Being confronted with market competitiveness, these victims of reform are to a great extent excluded by the new labour market due to the older, the low-skilled and lack of capital which are actually rooted in the former socialist planning system. Moreover, the transitory labour security program, the transitional unemployment insurance program and the low-standard MLSP are also not enough to provide the welfare security for the new outsider of ‘the system’. They become a marginal group which is characterized by limited institutional dependency and market exclusion. On the other hand, peasants were originally institutional inferiority under the background of emphasizing on the preferential development of city-based industries in pre-reform China. Since the reform, while the urban gate has been opened to the peasants due to the need from industrial development and urban construction, the migrants from rural areas to urban areas are still institutionally inferior, and further are placed at the social inferiority due to their rural hukou status. Without urban hukou, they are excluded from regular urban employment

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market and urban services. Many rural migrants are compelled into the informal labour market and also need pay extra cost for the urban services. As a result, the unstable income and the lack of social security cause some rural migrants to fall into poverty (Zhu, 2002). The poor rural migrants have comprised an underclass of urban society which is subjected to the dual disadvantage, institutional isolation and the resultant social exclusion. Evidences from the Nanjing survey factually indicate that the pauperization experiences of the new urban poor reflect the trajectory of institutional establishment and institutional transition from advocating the socialist egalitarian ideology to pursuing a pro-growth economic strategy in China. The official urban poor passively became the victims of state-oriented reform of ownership under market transition of economic system. They are economically excluded from the new employment market, and live in the poor conditions while receiving the limited welfare provision. The poor rural migrants become more vulnerable since the laid-off and unemployment has increased the employment competitiveness, especially in informal job market. Meanwhile, they are institutionally and socially excluded from urban mainstream society because lack of urban utilities can not endure the increasing pressure of urban services from the large-scaled immigration. In addition, narratives from the Nanjing interviews also show that, while the living and development problems of the official urban poor have been to some extent addressed, there is no formal policy concern about the subsistence conditions of the poor migrants. The poor rural migrants live at the most bottom of urban society. Findings from this study also suggest that the generation of the new urban poor in transitional China is an inevitable phenomena considering change in the economic growth toward intensive style and the relative surplus of labour supply. Furthermore, urban poverty has also been reinforced by lack of a societal welfare security system. Urban poverty which is close related with institutional transition under market transition cannot depend on the market to cope with. Positive social policy should be considered to tackle the increasing social problem. In fact, China’s development of national economy has come to this milestone, which need transform its development strategy from simplex

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Table 1 Eigenvalues and contributions in factor analysis Initial Eigenvalues Extraction Sums of Squared Loadings Component Total % of Variance Cumulative % Total % of Variance Cumulative % 1 4.212 23.402 23.402 4.212 23.402 23.402 2 2.920 16.220 39.622 2.920 16.220 39.622 3 1.618 8.991 48.613 1.618 8.991 48.613 Table 2 Principal component matrix Components Variables 1 2 3 Head of household’s characteristics Age .388 -.594 8.876E-02 Gender 9.750E-03 -.244 .100 Married status .292 -.337 4.349E-02 Education levels -7.887E-02 .254 .441 (Former)Occupations -.222 .371 .578 (Former)ownership sector .144 -.162 -.719 Unit benefit 3.624E-02 .331 -.467 Job stability .288 -.449 .115 Individual income monthly 1.296E-02 .480 -.321 Living time .467 -.614 5.236E-03 Household’s characteristics Size of household .851 .193 6.660E-03 Generations .759 1.089E-02 7.363E-02 The number of working persons .311 .653 -.118 Household income monthly .565 .428 .424 Basic living expenses .795 .405 -9.380E-02 Food expenses .817 .318 -5.829E-02 Housing sources -.431 .551 -4.802E-02 Housing space .629 -.171 6.448E-02

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