Beneath Shanghai's sky-scraping glass towers and smart department stores lurks another city. Just ask 42 year-old craftswoman 'Little' Zhao. She bristles when discussing how she was laid off after forging wire and pipe for almost 20 years for a state-owned property renovation company.
For more than two years, Zhao has been helping support her husband and daughter with a monthly Yn250 (US$30) severance stipend and occasional work provided her by her former employer and neighbours.
She is just one of the more than one million state workers who have been officially dismissed from Shanghai state companies since 1990. While the municipal government maintains that more than 890,000 of the city's laid-off workers have secured new jobs, the actual number of state employees no longer gainfully employed by their firms is understood to be considerably greater than the official total of 207,000.
Winners and losers
That China's reforms are creating new groups of winners and losers is not surprising, but what has Shanghai officials concerned is that economic liberalisation is burying 40 years of socialist egalitarianism beneath a stratified society of haves and have-nots.
According to the Shanghai Statistical Bureau, the average annual wage of a Shanghai employee in 1995 stood at Yn9,279 (US$1,172). Just under two million employees, or 41.7 percent of the total, receive annual wages higher than the average, including 123,500 employees whose annual wage surpassed US$2,410. But 58.3 per cent of city employees, or 2.74 million, received annual wages below the municipal average, including 189,400 workers who received j annual wages of less than US$390.
According to the Shanghai Statistical Bureau, those most likely to succeed in the new economy include employees of financial, trade, and services industries, such as real estate, health care, and sports. Those most likely to be down trodden include workers from the city's industrial sector. The bureau reported that during the period 1990 to 1995, 67 per cent of laid-off workers came from the city's sunset industrial trades. That proportion is scheduled to increase to 87 per cent during the current five-year period ending in the year 2000.
Particularly hard hit are Shanghai's textile and instrument manufacturing workers. According to Mr Li Kerang, president of the Shanghai Textile Holding (Group) Corporation, since 1992 the city's textile sector has shuttered, merged or completely ceased production at 164 factories, placing 30 per cent of the industry's total number of spindles out of commission. About 220,000 of Shanghai's 550,000 textile positions have been eliminated as a result. Over the next two years a further 80,000 textile positions will be among the 596,000 industrial jobs slated by city planners for elimination.
Older employees and women, too, are being disproportionately targeted for job lay-offs. A 1996 survey by Shanghai's Association of Women said that 78.2 per cent of all laid-off workers are above the age of 35 while 60 per cent of employees waiting for job assignments are women.
Moreover, for female workers the prospects of finding new jobs are not encouraging. A survey conducted last year by the Municipal Labour Union of 10,000 enterprises revealed that women are less likely to have the educational attainment and skills required by those companies actually taking on staff.
Shanghai's mayor Mr Xu Kuangdi denies that the city's economic restructuring is brewing social tensions. "Some workers may lose their jobs for the moment but it's only a step in our enterprise reform," said the mayor in March. "It in fact was progress in our labour-market reform.. Only under the planned economy will workers have an iron rice bowl."
But labour unrest due to employment woes is on the rise in the city. According to the Shanghai's Labour Arbitration Bureau, contract disputes for the year ending July 1996 increased by 56 per cent over the previous year. Much of the difficulty, the arbitration bureau said, lies in China's labour contract system, which has failed to provide employees with adequate job security or protection.
Teams dispatched by the Standing Committee of the National People's Congress last year inspected contracts at 100 Shanghai enterprises and found that more than half failed to adequately address questions of economic compensation, status of employees, contract length and other basic provisions.
Shanghai has responded to its unemployment dilemma by embarking on China's most ambitious and comprehensive re-employment drive to date. In recent years, the city has created as many as 425 agencies and sponsored more than two million training courses specifically designed for its laid-off workforce.
Central to the municipal government's efforts, however, has been the founding of re-employment training centres. These fall under the administration of the municipally-backed holding companies and provide laid-off workers with living stipends, life and medical insurance, as well as job skill training courses.
The first re-employment centres were opened in July 1996 by the Shanghai Textile Holding and the Shanghai Instrument and Meter Holding Company. Of an initial 115,000 laid-off workers, the two centres had found jobs for 58,000 as of April 1997.
Mr Zhou Liangcai, senior economist at Shanghai Textile Holding Company's Department of Foreign Economic Cooperation, says that job retraining efforts are primarily geared toward placing laid-off workers in service sector positions. "Many of our employees are older and are less educated," he says. "So many of them are trained for service industry work, finding jobs at hotels, supermarkets and restaurants."
The city bolstered its job retraining efforts earlier this year by encouraging five more municipally-backed holding companies to open re-employment centres, handling workers laid-off from the city's light industry, chemical, electric equipment, metallurgical and construction material manufacturing sectors.
City officials emphasise that the re-employment centres remain the financial responsibility of the parent holding companies, but the Shanghai government is seeding the programme with funds worth US$48m for the current year.
Shanghai's efforts to find work for its redundant job force have been identified by the State Council as a model for re-employment schemes throughout the country and its success or failure could help determine the fate of millions of state workers now being made jobless due to economic restructuring.
According to the State Statistical Bureau, the number of workers laid-off from urban factories reached 10 million in 1996, with only half finding new work as of April 1997. Still, the actual numbers are probably greater. Mr Pieter Bottelier, the head of the World Bank's mission to China, estimated that the unemployment rate in many Chinese cities has reached between 20 and 30 per cent, particularly in China's heavily industrialised rust-belt north-eastern provinces.
The official Xinhua news agency said that more than 420,000 workers in five main industrial cities were either laid off or resettled last year alone. They arose as a result of their employers declaring bankruptcy or merging with other companies: 133 enterprises in the cities of Shenyang, Dalian, Anshan, Fushun and Benxi alone were declared bankrupt and closed in 1996. A further 80 unprofitable enterprises in those cities were taken over by other companies.
Such massive restructuring has often led to work stoppages, sit-down strikes and protest demonstrations. The South China Morning Post reported in November that in the Heilongjiang coal mining city of Shuangyashan, where up to 80 per cent of the workforce has been laid off with many left to live off handouts of little more than US$8.40 a month, hundreds of unpaid miners have staged sit-ins in front of the local party headquarters.
The State Council responded to growing industrial restiveness by deciding in early March to set aside Yn30bn (US$3.61bn) as a reserve fund for mergers and bankruptcies of state-owned enterprises. The fund would also be used to establish re-employment programmes to provide jobs for those workers who would be laid-off by such actions.
In announcing the measure, vice-premier Zhu Rongji said that municipal and provincial governments would also be expected to support re-employment programmes by raising money locally. "Providing conditions for a good settlement of these workers is an important way to help money-losing state enterprises out of their difficulties," the vice-premier said. "And this can be done only by carrying out re-employment programmes."
Zhu also said that re-employment programmes are a uniquely Chinese insurance measure that is meant to protect the interests of the working class at a time when China does not yet have a well-functioning social security system. "We should persist, resolutely and unswervingly, in carrying out re-employment programmes," he said.
For Little Zhao, and the many other? like her, the problem is one of simply finding a decent and full-time job. Working occasionally as an US$18-a-week cleaning woman, she is clearly frustrated in the new environment: "With this kind of salary, what kind of life do you think I'm living?"