Comment on “The Labor Contact Law, Macro Conditions, Self‐Selection and Labor Market Outcomes for Migrants in China”

• Date: 01 January 2017
• DOI: http://doi.org/10.1111/aepr.12159
• Published date: 01 January 2017
• Author: Yiping Huang

Comment on “The Labor Contact Law, Macro

Conditions, Self-Selection and Labor Market

Outcomes for Migrants in China”

Yiping HUANG†

Peking University

JEL codes: J30, J41

The impact of the Labor Contact Law (LCL) adopted in 2008 has been a controversial

subject in both academia and policy circles. In the past, many union leaders and public

intellectuals often described the poor working conditionsand low pay for migrant workers

as the “dark side”of China’s recent industrialization. They enthusiastically supported the

introduction of LCL. Some entrepreneurs and economic policymakers, however, blamed

“premature”adoption of the LCL at least partly for economic difficulties in the aftermath

of the global financial crisis. Some evencall for the suspension or modification of the LCL.

Both of these views are based on a strong assumption that the LCL has significant

impacts on labor market outcomes, such as increasing wages, reducing working hours

and improving access to social protection schemes for migrant workers. As Meng (2017)

shows, a number of studies in the literature verified such an assumption.

Meng (2017) argues that by simply looking at the correlation between the adoption of

the LCL and labor market outcome variables, previous studies may have over-estimated

the impacts due to the common missing variable problems. She attempts to obtain more

accurate estimates by adding two types of “missing variables”. The first is a set of macro

conditionvariables. A city with a higheraverage wage rate, for instance,often also has better

labor market outcomes. The second is the so-called self-selection issue. Again, individuals

holding formal jobs are also likely to have better labor market outcomes. Meng concludes

that, while the LCL probably does have some positive impacts, those impacts are often

over-stated or mixed.

I find Meng’sstudy extremely interesting, withan important policy-relevant question, a

well executed statistical analysis strategy and conclusionsthat are somewhat different from

the existing literature. I also conquer with the main findings of Meng’spaper.

I have two comments, one on the estimation technique and the other on policy

implications. While the findings of Meng’s paper sound more plausible than some existing

studies, they may still be subject to the potential endogeneityproblem. For instance, Meng

uses the city average wage and a number of other variables to proxy for local labor market

conditions. But city-level variables including the average wage rate may also be affected by

the LCL or the “labor market outcome”variables. If these newly added “missing variables”

†Correspondence: Huang Yiping, 5 Yiheyuan Road, Haidian Dis trict, Beijing, China, 100871.

Email: yhuang@nsd.pku.edu.cn

doi: 10.1111/aepr.12159 Asian EconomicPolicy Review (2017) 12, 68–69

68 ©2017 JapanCenter for EconomicResearch

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