The Dynamic Change in Wage Gap Between Urban Residents and Rural Migrants in Chinese Cities

Abstract

Although a significant wage gap has been found in many previous studies between urban workers and rural migrants in Chinese cities, it is still not clear how such a wage gap may evolve over time. This paper uses both a dynamic wage decomposition method and economic assimilation model with pooled cross-sectional data from the China Household Income Project Survey (CHIPS) of 1999 and 2002 to investigate the change in the wage gap between urban workers and rural migrants over time and its determinants in Chinese cities. The estimation results show that (1) there is a widening on-average wage gap between urban workers and rural migrants across the two surveyed years in Chinese cities, mainly caused by the decline in the return to education for rural migrants; (2) rural migrants can catch up with the wage level of their urban counterparts as the time they reside in the host cities increases, but because of the decline in the speed of catching-up over time, rural migrants cannot obtain wages comparable to their urban counterparts in their life time, and more importantly well-educated rural migrants do not seem to have a significant advantage in this wage assimilation process than the lowly poorly-educated ones. Both findings suggest that there might be discrimination against well-educated rural migrants which prevents them from obtaining a fair wage in the Chinese urban labour market.