Why the market blew up: factors affecting demand for care work in China

This second blog post is going to attempt to describe the situation on the ground regarding supply and demand for domestic work in China, which is part of what drew me to this puzzle in the first place. This rise in demand for care work has been a global phenomenon, occurring as a result of changes in the structure of the global economy, but has been especially fierce in China due to factors that I will get into. First, I want to talk about what about care-work at the global level, and why we see a shift towards a heavier reliance on the market based provision of care. Second, I will address specific trends in China that have created a rapid increase in demand for care work.

Factors affecting global demand for care work

As an American, I have always looked to Northern Europe as this sort of Utopia for all people, mostly because of the amazing social security net in place. While I admit this admiration was naïve, and every system is brimming with its own problems, it is a fact that the welfare system in many Northern European countries is beyond that which an American could even dream of. A basic text in the classification of different welfare systems is Esping-Andersen (1990) classic, The Three Worlds of Welfare, which basically categorizes all the different ways that a state can provide welfare into three different types: liberal, conservative, and social democratic. This is going to get a bit nerdy, but I think it is important to understand these different modes of welfare states to really understand all the different ways that the state can and does get involved with the distribution of benefits.

  • The liberal regime type state offers means-tested assistance to the low-income people, but otherwise encourages market-based solutions. We see this in the United States, with our private healthcare and then schemes such as Medicare to support those who cannot afford insurance. Those who receive benefits are often stigmatized, with a “earn what you have” ethic prevailing (and we see how great that is working for us right? jk).
  • The second regime type is the conservative, where the welfare system is often coordinated by the state, but is also heavily attached to your participation in the labor force, therefore creating and sustaining class differentials. You see this kind of system in Germany, where there is a strong tradition of services being delivered through employers. Also, there is often a fun undercurrent of religious institutions here, where they supplement gaps in the welfare system with charity. Think the Catholic Church in Italy!
  • Finally, you have the gold standard of welfare systems (according to me, might get a different story from a libertarian), which is the social democratic regime. The state in this regime cuts the market out of the equation and becomes the provider of services. For example, when it comes to childcare, the state runs daycare centers that are utilized by blue-collar and white-collar workers alike, with no difference in the quality of service, regardless of class. This system effectively “de-commodifies” these services, turning them into a right not a privilege, working of a Universalist ethos.

Quick caveat: these different “regimes” are all ideal types, meaning that they don’t exist in their perfect forms in the real world. This social democratic regime dream is what I’m talking about when I say that as a liberal American, I have always envied Europe, because the system in place is as close to the social democratic regime as we have (particularly Northern Europe). But unfortunately, the regime is truly just a dream. The reality is that today’s welfare systems are slowly changing as political, demographic, and economic transitions take place. The conservative and social democratic welfare regimes have been increasingly shifting toward the stagnation of public sector growth and the subsidization of outsourcing care work to the private market (namely to hiring domestic workers) (Estévez-Abe and Hobson 2015). This is a particularly politically expedient solution, as wealthier countries have also been experiencing raised rates of migration in the form of refugee programs as well as migrant labor. Therefore, the growth of a maid industry serves to both employ low-skill foreign workers while also meeting the care needs of the population.

So globally, big trends are high rates of migration and the rolling back of welfare systems, all of which lead to higher demand for maids (domestic workers) in the absence of publicly provided services. Are these same factors in play in China? Yes, and they are also joined by other political and economic shifts which have intensified the rise in demand.

Factors affecting China’s demand for care work

These factors can broadly be broken down into political, economic, and demographic shifts that have affected the way Chinese families meet their care needs and have created a rapid increase in the actual demand for nannies, maids, cooks, and other care workers. How can we tell that there has been an increase in demand for care work? For one, in a report by the ILO, it was found that in 2017, 40% of families had an unmet need for a domestic worker (Speake 2017). But another telling piece of evidence is just the increase in the number of labor brokerage agencies (small companies through which you can hire a nanny). These firms only sprung up within the past 20 years, and have just rapidly multiplied every year since. To describe the factors influencing demand, I’m just going to give a really short explanation for each factor.

Economic factors

  • Rise in family incomes and the collapse of the danwei system

Following the Reform and Opening policies of the 70’s and 80’s, China’s economy transformed from a centrally planned socialist economy to a roughly free-market economy (this is vastly simplifying China’s economy, but hang with me). Chinese citizens have experienced a rapid rise in income, with the annual GDP growth averaging around 9.4% (Zheng 2005, 18). For comparison, according to World Bank data, the highest rate of GDP growth the USA has experienced since 2000 has been 3.8% in 2004. Unfortunately, as we know, rising tides do NOT raise all boats! The growth of the economy did not resulted in higher incomes for all, and instead resulted in a rapid rise of inequality. Following economic reforms, China’s Gini coefficient (a metric used to measure inequality, ranging from 0 to 1 where 0 is perfect equality and 1 is absolute inequality) raised from 0.31 in 1981 to 0.47 in 2008 (Lin 2013, 263). For reference, the United States has a Gini coefficient of 0.49 and Denmark has a Gini coefficient of 0.25.

Part of this economic story is the dismantling of socialist institutions in exchange for a freer market. Particularly, prior to the economic reforms, there was widespread public provision of health care, education, and childcare, which were connected to employment in state-owned enterprises. This employment structure was called the danwei, or the “iron rice bowl,” which referred to lifetime employment and guaranteed benefits. When this employment system was dismantled in favor of a market economy, childcare responsibility was shifted from the state back onto families therefore rapidly increasing demand for care workers.

• Economic migration

Migration has been a major factor in both the demand for care and supply of workers. In the post-reform era, millions of rural-residents have relocated to urban centers to seek economic opportunity. This group of rural immigrants are called the “floating population” as they relocate to first-tier cities without means of securing formal employment and abandon the safety net available to them in their hometowns through their hukou. Due to the lack of employment opportunities in rural areas, would-be migrants are willing to sacrifice the stability of rural life for better opportunities in cities. The size of the rural-to-urban migrant populations are very hard to ascertain due to their precarious situation and as a result of the incentives for the government to downplay the size of this group. According to the National Bureau of Statistics of China, the size of the floating population in 2015 was approximately 247,000,000 (see figure 6) (National Bureau of Statistics of China 2015). In addition, Shanghai’s floating population is the largest in all of China, with 11 million migrants living in the city, composing approximately 42% of its residents (Lu and Xia 2016, 14).

What does migration have to do with care work? What this does is create a large population of workers who face labor market segmentation (being cut off from formal employment opportunities because of their illegal residence in the cities, and therefore being forced into the informal labor market) and therefore are paid significantly less than their formally employed counterparts. The availability of this cheap labor perpetuates the system in place, and with no real need from the families to seek a change in policy.

Demographic factors

  • Family nuclearization

What I call family nuclearization is really just a shift we are seeing in the structure of families in China. In the past, Chinese families have depended on a care network comprised of various family members, but mostly depending on the paternal grandparents. Researchers who have looked at the relationship between maternal labor supply, maternal childcare, and the proximity of the nuclear family to either the maternal and paternal grandparents found that a grandparent living in the home is likely to reduce the probability that mothers are engaged in intensive childcare labor by 35% (Chen, Short, and Entwistle 2000, 582). Basically, when grandparents are available to take care of children, mothers are much more likely to join the workforce. This shows the dependence of a family on either the mother or the grandparent, if either of these don’t work out?

So that is in the past, but what has changed? Nuclear families in the middle and upper income bracket who move to cities are often separated from extended family that might have provided care. Upon the birth of a child, grandparents might be unwilling or unable to move to where there children are or the family might be unwilling to have a parent live with them.

The experience of a Shanghai family is an example of this trend. This individual’s parents have yet to retire and still live in their home province of Hubei; her husband’s parents had moved to the USA. She described to me the two reasons that her husband and she decided to hire a domestic worker. First, her parents still had not retired and were unwilling to uproot their lives in Hubei to join her husband and her in Shanghai. Although she would have preferred to have her parents look after her child, these factors made this impossible. The second reason is that her husband was unwilling to have either one of their parents live with them. This shows a shifting of values in China, where the younger generation is more likely to resist living with their parents. In a study looking at trends of co-residence, it was found that those with more financial resources would be less willing to co-reside with an parent, as they were able to pay for institutional care and more highly valued living alone (Zhang, Gu, and Luo 2014, 274). In an era where Chinese family size is shrinking and nuclear families are growing increasingly isolated from their extended, traditional care solutions are dissolving and new care solutions are arising. In this environment, demand for domestic workers has risen. 

  • Aging population

Another important factor affecting demand is the age structure of China’s population. China’s elderly population is larger than that of other developed and developing nations. China’s demographic aged 15-64 consists of 71.3% of its total population, those aged 65+ consist of 17.8% of its total population (United Nations Population Fund). Brazil’s are 69.3% and 8.9% (United Nations Population Fund). Canada’s population aged 15-64 consists of 67% of the total population while the population aged 65+ consist of 17% (United Nations Population Fund). The USA’s proportions of those aged between 16-64 and those aged 65+ are 66% and 15%, respectively (United Nations Population Fund). Uganda’s are 50% and 2% (United Nations Population Fund).

While the current age structure is not threatening, population projections show that China’s population will be aging much faster than countries with similar GDPs and levels of development. For some visuals, look below at Figure 1. These trends are caused and exacerbated by the infamous One-Child policy, which reduced the fertility rate; therefore people retiring are no longer being replaced in the work force. What this looks in reality, is a couple in their thirties each with a set of parents, two sets of aging grandparents, and a child, and minimal to nonexistent support from the state. Basically, every person’s worst nightmare (or maybe I’m the only one freaking out at the age of 23 about what I’m going to do when my parents get old? Maybe this research is getting in my head…). All in all, more and more families are forced to hire domestic workers to care for their elder family members.

Figure 1. Population projections by age group for the year 2050 in China
Source: United Nations Populations Fund

Conclusion

All this post aims to do is to set up a little background to the current project I’m working on in Shanghai. Adding this second post to the last post, we have some more understanding of the theoretical underpinnings of care work/ feminized labor and some factual information as to what is happening in the world visa-vis the care work. Hope this helped, please comment below any questions or comments!

Sources

Esping-Andersen, Gøsta. 1990. The three worlds of welfare capitalism Cambridge: Polity Press.

Estévez-Abe, Margarita, and Barbara Hobson. 2015. “Outsourcing domestic (care) work: the politics, policies, and political economy ”  Social Politics 22 (2):133-146.

Lin, Justin Yifu. 2013. “Demystifying the Chinese economy.”  The Australian Economic Review 46 (3):259-68.

United Nations Population Fund. “World population dashboard Brazil.”

United Nations Population Fund. “World population dashboard Canada.”

United Nations Population Fund. “World population dashboard China.”

United Nations Population Fund. “World population dashboard Uganda.”

United Nations Population Fund. “World population dashboard United States.”

Zheng, Bijian. 2005. “China’s “peaceful rise” to great-power status.”  Foreign Affairs 84 (5):18-24.


[1] Interview with #2, an employer of a care worker, Shanghai, 14 January 2018

One Comment Add yours

  1. Joyce Ho says:

    Thorough work! A great overall background guide to the general market!

    Like

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