Do workers benefit from economic upgrading in the Pearl River Delta, China?

Since the 2000s, China has faced challenges such as rising land costs, environmental degradation, and shrinking global demand. To address these, the central and local governments have implemented various measures to promote economic upgrading (EU), particularly in coastal areas. While most scholarship focuses on promoting EU, this study examines its social consequences, specifically focusing on whether EU leads to social upgrading (SU) for workers. SU is defined as the improvement of worker entitlements and rights, enhancing the quality of employment. Existing research, often based on global value chain (GVC) studies, has limitations: it often focuses on specific value chains rather than geographical areas, employs firm-centric approaches neglecting worker-level factors, primarily examines measurable standards instead of enabling rights, and overlooks the role of the state. This study addresses these gaps by using data from the China Labor-force Dynamic Survey (CLDS) and interviews to investigate the relationship between EU and SU in the PRD.

The literature review examines economic and social upgrading and their governance. Economic upgrading (EU) involves improving products, enhancing production efficiency, or shifting to higher-skilled activities. Social upgrading (SU) focuses on improving workers' rights and entitlements. Existing GVC studies often show SU lagging behind EU in developing countries. These studies, often firm-centric, lack worker-level data and usually focus on measurable standards (e.g., wages, social insurance) neglecting enabling rights (e.g., freedom of association, collective bargaining). The role of the state in moderating the relationship between EU and SU is also often understudied. Cluster studies focusing on "tertiarization" (shift from manufacturing to service sectors) provide complementary evidence, showing potential social downgrading due to job polarization. The role of governance, encompassing public and private actors and functions like facilitation, regulation, and redistribution, is crucial in shaping the EU-SU relationship. While trade unions are important in Western contexts, their role in China differs significantly due to the party-state structure. Public governance, particularly the state's role, is highlighted as the most influential driver of SU, although the mechanism remains under-researched.

This study uses a mixed-methods approach, combining quantitative and qualitative data. The quantitative data comes from the 2012 and 2014 waves of the CLDS, focusing on the PRD. The CLDS provides data on measurable standards (wages, social insurance) and enabling rights (voice). The study extracts samples of employees and analyzes three aspects of working conditions: wage, social insurance (medical and pension), and voice. Linear regression is used for continuous variables (wage, voice), and logistic regression for the binary variable (social insurance). Control variables include gender, age, education, contract type, skill certificates, trade union membership, hukou status (urban, local rural migrant worker (LRMW), outgoing rural migrant worker (ORMW)), sector, and enterprise ownership. Qualitative data is gathered through semi-structured interviews with scholars, employers, officials, and rural migrant workers (RMWs) in 2016. Interviews were conducted in Shenzhen and Foshan to capture different types of EU (tertiarization and reindustrialization). The interviews aimed to understand how EU affected RMWs and the mechanisms through which EU influences workers. The EU variable in the regression models is coded as 1 for 2014 and 0 for 2012.

The study found that EU in the PRD from 2012-2014 positively affected SU, contrary to findings in Western countries where SU often lags behind EU. Direct comparison of 2012 and 2014 data and regression analysis both showed significant improvements in wages and social insurance (medical and pension). However, the impact on "voice" (an indicator of enabling rights) was less significant. Regression analysis controlled for confounding variables, revealing that EU significantly increased wages, and the likelihood of having medical and pension insurance. EU also had a positive impact on workers' voice. While social insurance coverage increased across various groups, some groups, like older workers and those with higher education, showed greater gains. LRMWs witnessed considerable improvements in pension insurance, though their wage gains were less pronounced compared to urban workers. The impact of EU on voice was less uniform, with workers in high-end service sectors reporting larger gains than those in manufacturing. This difference is attributed to intensified competition in the manufacturing labor market resulting from automation and improved efficiency.

The findings highlight the critical role of the state in balancing EU and SU in China. Unlike many developing countries, the PRD did not experience widespread social downgrading. The state's shift in focus from economic to social development, transitioning from prioritizing economic growth to prioritizing people, played a key role. The state's intervention resulted in improvements in measurable standards (wages, insurance) surpassing those in enabling rights (voice). The implementation of policies was flexible, with stricter regulations in areas with higher EU. The state's influence on wages mainly benefited low-income workers whose wages were near the minimum wage. Local states used flexible governance, adjusting regulations based on economic conditions and enterprise size, with stricter regulations for larger enterprises. The divergence in SU across different aspects (measurable standards vs. enabling rights) suggests that treating SU as a monolithic concept is inadequate.

This study demonstrates that EU in the PRD has led to SU for workers, contrary to some findings in other developing countries. The state's role in balancing EU and SU is crucial. While improvements in measurable standards (wages, social insurance) are significant, improvements in enabling rights (voice) lag behind. Future research should investigate the evolving role of workers in SU, given their growing social awareness and activism. The effectiveness of public governance in promoting SU in an authoritarian context warrants further investigation.

The study's time frame (2012-2014) limits the generalizability of the findings to longer-term trends. The reliance on self-reported data on voice might introduce bias. The convenience sampling of interviewees might not fully represent the diversity of workers in the PRD. Future studies should address these limitations by considering longer-term data and employing more representative sampling techniques.