The Chinese labor market, 2000–2024 Updated

Elevator pitch

China experienced significant economic progress over the past few decades, with an annual average GDP growth of approximately 8.6%. Population expansion has certainly been a contributing factor, but that is now changing as China rapidly ages. Rural migrants are set to play a key role in compensating for future labor shortages. However, they still face significant barriers to live in cities permanently, resulting in surging waves of return migration in recent years. Additionally, China faces a low fertility rate of 1.01 births per woman, although the population control policy has been relaxed. Millions of people are employed in the food delivery and courier industry, yet with little social benefit and insurance, which poses potential challenges for China’s labor market stability.

Key findings

Author's main message

China’s remarkable economic growth during the last three decades enabled the country to surpass Japan as the world’s second largest economy. One of the leading factors behind this growth has been its very large working-age population. However, as this population ages, a potentially insufficient labor force may threaten future economic growth. Rural youth may present the answer to this challenge, but the government must begin treating rural migrants equally by offering them full citizenship rights in urban areas. The relaxation of the population control policies has a limited effect on the birth rate, especially in urban areas. To counter this, China must promulgate effective policies to increase people’s willingness to have children.

Motivation

China is now the world’s second largest economy, and it continues to grow at a phenomenal rate. China has gradually increased its impact on the global economy via international trade, and its steady progress has advanced global economic development. China’s rapid growth over the last three decades benefited from the so-called “demographic dividend,” referring to its large proportion of working-age people during this time, but that situation is now changing. This makes understanding the evolving features of the Chinese labor market a crucial task for the design of future policy agendas.

Discussion of strengths and weaknesses

Population, labor force, and urban unemployment

Before the mid-1990s, China was characterized by a centralized job assignment system. Essentially, all urban workers were hired into state-owned enterprises (SOEs) or collectively-owned enterprises (COEs), and firms were prohibited from dismissing workers. After experiencing huge profit losses, SOEs and COEs were substantially restructured from 1997 to 2000, which led to an increase in the number of dismissed urban workers at the turn of the century. The subsequent privatization of SOEs and the burgeoning non-state enterprises then enabled the private sector to begin absorbing surplus workers in urban labor markets. The reform period neared its end in 2006.

The unemployment rate in the urban labor market from 2000 to 2021 is presented in Figure 1. As seen, the rate increased from nearly 3% in 2000 to around 4.5% in 2004, which can be attributed to fallout from the major reforms. The unemployment rate remains relatively stable between 2005 and 2019. However, since the Covid-19 pandemic erupted in late 2020, China’s unemployment rate surged, with particularly pronounced effects among young workers. 

The dotted line in Figure 1 illustrates the unemployment rate of youth labor, defined as the urban labor force between 15 and 24 years old. Youth unemployment is nearly three times as high as the urban unemployment rate. The Chinese government’s stringent zero-Covid policy during the pandemic led to widespread business disruptions, forcing many companies to either downsize or declare bankruptcy. Recent graduates and young workers with limited experience bore the brunt of these economic challenges, driving youth unemployment to 15.3% in February 2022. Contrary to expectation, the rate of youth unemployment did not decrease during the post-pandemic period. As China’s National Bureau of Statistics (NBS) latest data, it reached 16.9% in February 2025, indicating that the obstacles confronting young job seekers are not merely cyclical but likely reflect deeper structural issues within the labor market. 

China’s younger generation—especially those born after 1990—faced diminishing intergenerational social mobility, meaning fewer chances to climb the socioeconomic ladder compared to their parents [1]. This pattern is particularly striking given that today’s youth are far more educated: the 2020 census reveals that 37.9% of 15–29-year-olds attained at least a three-year college degree, more than double the 17.5% of 30–59-year-olds who did so. In short, China is facing a problem of low social mobility.

However, please note that the official unemployment rate may be biased downward. This is because the NBS uses self-registered unemployment to calculate the country’s unemployment rate but many eligible workers did not register themselves as unemployed. The NBS stopped releasing this data after 2021. Since 2018, the urban unemployment rate has been calculated using survey-based data, which is higher than the self-registered rate. Figure 1 illustrates the disparity caused by this methodological change, with the traditional registered urban unemployment rate being lower than the new surveyed rate (dashed line). However, both methods show consistent trends in unemployment rates.

Figure 2 plots the size of the labor force and the working-age population. The solid line shows that the working-age population (aged 15–64) peaked at 1.02 billion in 2015 and began to decline thereafter, falling at a 0.7% pace annually. By 2023, the number of workers who were of working age was approximately 962.3 million, signaling both the end of China's four decades demographic dividend and the emergence of significant population aging challenges. The dotted line shows the labor force, defined as those who are of working age and able to work (employed and unemployed). The number of the labor force declined from 800.9 million at its peak in 2015 to 772.2 million in 2023. Therefore, the working-age population and labor force both indicate a decreasing trend since 2015. This downward trend is likely to persist in the foreseeable future, as evidenced by the population structure and low fertility rate shown in the following figures.

Figure 3 examines the population’s age structure in urban and rural areas in 2020 using census data. A striking feature is that the urban areas is experiencing a shrinking population for the younger generation. Specifically, the number of urban residents younger than 30 is about 205.5 million, compared with 280.3 million people in urban areas between the ages of 30 and 59. This means that the urban labor force increases rather slowly when today’s youth enter the labor market, and may even experience a significant drop in the future. In fact, the labor shortages in urban areas are attributed to a highly restrictive population control policy from 1979 to 2015, namely, the "one-child policy".

The one-child policy was implemented in 1979 and limited the number of children couples could have. Specifically, urban couples were allowed to have only one child, whereas rural couples with one daughter could have a second child. Exceeding this quota incurred severe penalties. For example, urban residents could lose their jobs as well as their access to social welfare. The punishment for rural people was a one-time fine, which most could not afford. Not surprisingly, the policy significantly reduced fertility rates [2], [3], which is now affecting China’s labor supply. Indeed, as Figure 2 shows, China’s labor force peaked in 2015 at 800.9 million people and has since declined. Concurrently, China is also facing a shrinking population. According to NBS, China’s population peaked in 2021 at 1.41 billion, entering a sustained decline. The UN predicted in 2024 that China’s total population would decrease to 1.26 billion by 2050 [4]. 

In light of these potential problems, the one-child policy has been gradually relaxed by the government since 2002. Under the new rules, couples who are both only child were allowed to have a second child. In 2014, couples, of whom at least one was an only child, were allowed to have a second child. In 2016, the one-child policy was replaced with a universal two-child policy. In 2021, a three-child policy was implemented. However, these changes have yielded limited success in reversing the country’s declining fertility trends. As shown in Figure 4, while the fertility rate per woman (measured as the average number of children born to women aged 19–49) rose from 1.55 in 2010 to 1.82 in 2016, this upward trend proved short-lived. By 2023, the rate had plummeted to just 1.01—far below the replacement level of 2.1 births per woman.

As shown in Figure 3 , rural regions experienced a modest population increase among those under 15 after the relaxation of the one-child policy. However, the urban birth rate remained low, indicating that policy adjustments had little effect on fertility decisions in cities. A possible reason is that the urban couples face a high cost of raising and educating a child. According to a report released by a Chinese demographic research team, raising a child from birth to age 18 costs parents an average of US$99,582 in urban areas [5]. The high cost of raising children works as a high barrier to fertility decisions for many couples. In the foreseeable future, China could confront the dual challenge of a declining workforce and a low birth rate. Therefore, it needs to design more effective policies to encourage people to have children.

Rural migrants

A key aspect to consider when looking toward the future is China’s rural population. As shown in Figure 3 , the population in rural areas below the age of 30 is relatively sufficient. Therefore, absorbing rural workers into urban areas can help address the expected decrease in cities’ labor supply. However, for decades, rural migrants have been discouraged (and in many cases prohibited) from residing in cities because of a government system called "hukou". Established in the 1950s, this system categorizes individuals as agricultural or non-agricultural (hukou) people based on their place of birth, and is intended to anchor rural population to the countryside. In 1992, as economic growth accelerated, the central government relaxed restrictions on migrant mobility to meet increasing labor demand in cities. At first, a large number of rural people moved into urban areas to find jobs. However, rural migrants were treated very differently from urban residents, causing the situation to change in recent years. One important reason is that they cannot easily transfer their hukou to their destination cities, especially for those working in large cities. Other reasons include unaffordable house prices, no access to city healthcare, and challenges in enrolling their children in urban public schools. Many migrants opt to work in urban areas temporarily and then return to their home counties after earning money [6]. Therefore, China needs to gradually lift the obstacles preventing rural migrants from becoming true urban residents.

Demographic change

China’s aging population is becoming a massive problem that extends beyond the issue of labor shortages. A large increase in the proportion of those above the age of 70 is expected by 2030. According to the UN, China is aging more rapidly than almost any country in recent years [7]. The baby boom in the 1960s and 1970s and the subsequent one-child policy distorted the country’s population structure. When the baby boomers grew up and entered the labor market, the working-age population increased considerably. China’s economic growth thus benefited from this so-called “demographic dividend” over the past three decades or so, but the environment is changing as those baby boomers age. Figure 5 presents the dependency ratios of children, the elderly, and the total from 2000 to 2023. This ratio, defined as the number of dependents per 100 working people, compares the difference between those not in the labor force with those who are working. The figure shows that the dependency ratio of retired people rose from 9.9% in 2000 to 22.5% in 2023. In contrast, the child dependency ratio has remained stable since 2010, with only minor fluctuations, at 22.3% in 2010 and 23.9% in 2023. Consequently, the total dependency ratio climbed from 34.3% in 2010 to 46.5% in 2023. The above evidence indicates that the aging population has become a major concern for China.

Hukou and the evolution of the two-tier urban labor market

China essentially had no labor market before the 1980s. Instead, a central planning system was established by the Chinese government, which allowed it to control the prices of food, goods, services, employment, and wages. The government monopolized the purchase of agricultural products and assigned quotas to urban people who could purchase products at low prices [8], and labor mobility from rural to urban areas was restricted by the central government.

In the late 1970s, economic reforms began in China, as the planning system had become incompatible with economic development. As a consequence, China started welcoming foreign investment for the first time, and the potential increase in competition compelled SOEs and COEs to improve their efficiency and performance, with SOEs adopting wage reforms and decentralized labor management. In 1984, the government changed the fixed-wage system, in which wages were set by the government, to a floating-wage system, in which SOEs and COEs were allowed to set their own wages. At that time, the unemployment rate in China did not exceed 1%.

Non-state-controlled firms began to emerge, and entrepreneurs were allowed to run businesses in urban areas. These developments, along with other reforms, made labor allocation highly flexible in urban markets.

With this rapid growth of non-state sectors, the demand for rural labor dramatically increased, and rural population were enthusiastic about moving to urban areas. This led to a gradual relaxation of the restrictions on labor mobility so that rural workers who acquired jobs in urban enterprises or who owned businesses were allowed to migrate temporarily to cities but did not receive food support from the state. However, rural migrants were not welcomed by urban residents, and governments often forcibly relocated them to the countryside for security and other reasons.

Beginning in 1992, the economy was further opened up, thereby permanently changing China’s economic development path. To meet the growing labor shortage in urban areas, the government further relaxed its stance on migrant mobility. Instead of restricting rural laborers to their home counties, the government formally allowed rural laborers to migrate to cities as long as they could provide the required certificates, including identification cards, temporary resident permits, and employment certificates [7]. This led to a substantial increase in rural-urban migration, with the number of rural migrants residing in urban areas reaching 50 million in the mid-1990s [9]. Local governments responded to the associated increase in competition for jobs by establishing policies to restrict the employment of rural migrants to specific occupations, thereby protecting urban workers. Most of these posts were classified as dirty, dangerous, and demeaning, or were occupations that urban people were unwilling to accept [10]. Despite these challenges, this marked a major societal change, as rural migrants were no longer being expelled from urban areas.

Since 1992, China’s economy has been developing at full speed. Average GDP growth increased by almost 8.6% per year from 1992 to 2023. Rural migrants provided much of the cheap labor force that promoted this high growth rate. However, the hukou policy persists, and rural migrants are still classified as outsiders, taking jobs with low wages and long working hours. They are also not able to enjoy many of the social benefits available to urban residents, such as health care, housing, and insurance, and their children are often prohibited from attending urban public schools.

Rural versus urban: Education

There are considerable differences between the basic demographic characteristics of working-age urban residents and rural migrants. Figure 6 uses data from the China Health and Nutrition Survey (CHNS) and China Family Panel Studies (CFPS), two nationally representative surveys, to display some of these features over the period 2000–2022 in urban areas. In China, the retirement age is 60 for men and 55 for women. Hence, people older than 16 but younger than 60 (for men)—younger than 55 (for women)—are included in the figure. 

Figure 6 shows that the difference in formal education between migrants and urban workers is evident. Specifically, rural migrants completed an average of 10.6 years of education, slightly above China’s compulsory education requirement. In comparison, urban workers had an average of 13.4 completed school years, equivalent to a high school diploma plus some higher education. The large gap in education between rural and urban workers highlights lagging human capital development for rural workers [11].

Rural versus urban: Working hours and wages

Rural migrants’ average weekly working hours are much longer than those of urban workers. Given the lower education level and discrimination from the urban labor market, rural migrants often work menial jobs. They usually rely on their manual physical strength to find jobs and work overtime without extra pay. According to NBS, 15.4% and 27.5% of rural migrants worked in the construction and manufacturing industries in 2023, respectively. Beyond these traditional sectors, a growing number have shifted to flexible gig jobs. It is estimated that approximately 10 million people now work in the food delivery and courier industry using electric bicycles, the vast majority of whom lack medical and injury insurance. This large, vulnerable workforce, facing unstable employment conditions and inadequate social protections, poses significant challenges for China’s labor market stability. Meanwhile, rural migrants also encounter the issue of delay in wage payment. Approximately 1% of rural migrant workers could not obtain their full payment in 2015. Among those workers, an average delinquent amount of 10,682 CNY was overdue. Rural migrants also concentrated in occupations that exposed them to overtime work. The Labor Law of the People’s Republic of China, which went into effect in 1995, requires laborers to work no more than eight hours a day and not more than 44 hours a week, on average. However, Figure 7 shows that rural residents worked more than 50 hours per week in most observed years. By contrast, urban residents maintained a comparatively lower workload, averaging 46.6 hours per week in 2022.

Figure 8 presents average real weekly wages for urban workers and rural migrants from 2008 to 2023 (the data are not available before 2008). Overall, wages trended upward during the sample period. For example, the real weekly wage increased from 461 CNY  in 2008 to 1,423 CNY  in 2023 for urban workers and from 278 CNY  to 732 CNY  for rural migrants. Moreover, the wage differentials between urban workers and rural migrants widened in the sample period. In 2008, urban workers’ wages were approximately 65.8% higher than those of their migrant counterparts. By 2023, the gap had widened to 96.8%.

The migration of rural workers into cities once helped keep wages low in urban areas. However, the significant rise in wages over the past decade indicates that this is no longer the case. Evidence shows that Chinese labor was relatively cheap compared to its productivity before 1997 but since then it has become comparatively expensive [12]. Between 2013 and 2023, real labor productivity in China grew at an annual rate of 6.4%, while real wages rose nearly 7% per year. This has led to a situation in which labor in China is now more expensive than in many other developing countries and less cost-effective due to wages rising faster than productivity.

China Economic Information Center (CEIC) data reveals that over the past decade, China’s labor market has experienced substantial wage growth. From 2013 to 2023, Chinese workers' average monthly earnings rose from US$770.33 to US$1,393.50 − an increase of 80.8%. This surge starkly contrasts with trends in other developing countries during the same period: Malaysia witnessed a 14.3% decrease (from US$860.98 to US$737.88), Brazil saw a dramatic fall of 61.5% (from US$1,382.13 to US$670.82), while Thailand and Vietnam had modest increases of 11.65% (from US$386.12 to US$431.05) and 69.9% (from US$201.73 to $342.76) respectively. These comparisons highlight that China’s current wages significantly exceed many middle-income nations.

This wage growth may be driven by labor productivity improvement, measured here as monthly output per worker. In the same period, China’s productivity rose by 77.1% from US$1,161.85 to US$2,057.58. This is starkly different from patterns observed in other economies: Malaysia’s productivity edged up marginally by 3.7% (from US$2,034.68 to US$2,109.46), while Brazil’s plummeted -17.8% (from US$2,200.58 to US$1,808.01). Thailand registered moderate growth of 20.4% (from US$887.46 to US$1,068.82), and Vietnam achieved the most dramatic expansion at 93.0% (from US$364.03 to US$702.53), nearly doubling its output per worker over the decade. These comparisons demonstrate that while China achieved significant productivity gains, its wage growth over the same period was even more pronounced.

The above data suggests that Chinese labor costs have risen substantially, accompanied by significant improvements in efficiency compared to both historical levels and many comparable nations. Importantly, however, the pace of wage increases has marginally outpaced productivity gains, eroding the historical advantage of “cheap labor” – particularly the “dividend” once provided by rural migrants. China has thus transitioned to a development phase characterized by higher costs and higher productivity. This shift implies that China may no longer be the optimal location for labor-intensive industries reliant on low wages. Nevertheless, its high productivity levels, coupled with superior infrastructure and economies of scale, may continue to support relatively higher wages and maintain competitiveness for industries demanding skilled labor, advanced infrastructure, and large-scale operational efficiency.

The trends of rural labor migration

China’s economic growth has traditionally been driven by rural-urban labor migration. However, recent years have seen a significant shift in this trend. According to NBS statistics, more migrant workers are now opting to stay closer to home.

Data from NBS shows a decrease in the percentage of migrant workers employed outside their home counties from 62.3% in 2008 to 59.6% in 2024. Even more notably, Figure 9 indicates that the proportion of migrants working beyond their home provinces dropped from 33.2% to 22.8%. This data indicates a decline in rural migration as workers increasingly seek employment opportunities closer to home.

Limitations and gaps

Given the findings in this article, there are a number of topics deserving further research. For example, work should be undertaken to identify feasible solutions for dealing with China’s significant demographic challenges. Specifically, China is experiencing two key demographic challenges: the accelerated aging of the labor force and persistently low birth rates, even after the relaxation of its population control policy.

Another related topic that warrants further investigation is the employment challenges facing China’s younger generation. Despite being better educated than their parents, they encounter significant difficulties in securing employment opportunities. Their prospects for upward income mobility appear limited, suggesting China may face a growing social mobility crisis.

A further critical topic concerns the resumption of the US-China trade war in 2025. As of this article’s publication, the US has imposed a hefty 145% tariff on roughly $440 billion worth of Chinese goods. The US president, Donald Trump, has been urging American companies to bring their production back home. This external pressure, combined with rising domestic wages and a shrinking migrant workforce, could accelerate the relocation of manufacturing away from China. This trend warrants further investigation into its implications for future economic growth and potential strategies to retain foreign investment in China.

Summary and policy advice

China is set to face major challenges in the coming decades due to its rapidly aging population. The high dependency ratio of retirees and very low birth rates may significantly inhibit future economic growth, and are sure to strain public finances.

One of the key issues that may help to alleviate China’s demographic challenge is the situation of rural migrants in urban labor markets. The prominent hukou policy still separates workers into two distinct tiers, with most rural migrants occupying the bottom of the social strata in cities. In line with this, the evidence shows that substantial inequalities exist between rural migrants and urban workers, with the latter group earning higher wages and having lower unemployment rates than their migrant counterparts.

The Chinese government must provide abundant funding to care for its elderly in the future. The budget should thus be reevaluated to improve spending efficiency. One option is to promote the reallocation of workers from SOEs to private firms and to further relax financial constraints on private companies. Turning to the issue of a declining labor supply, increasing the fertility rate would help address the decreasing proportion of youth in the population. This calls for a possible further relaxation of population control policies. Furthermore, while the urban labor force is aging rapidly, an abundant supply of youth labor exists in rural areas. Hence, rural migrants could play an important role in dealing with the aging urban population challenge. Policymakers should therefore devote substantial attention to reducing segregation in urban labor markets, and rural migrants should be able to enjoy the same benefits as their urban counterparts. The Chinese government needs to implement more policies to facilitate the smooth employment of young and inexperienced graduates.

Acknowledgments

The authors thank an anonymous referee and the IZA World of Labor editors for many helpful suggestions on earlier drafts. The authors are grateful for the funding support provided by the Natural Science Foundation of China (Grant Nos 72034006 and 72073051). Version 2 of this article updates all parts and adds new Key references  [1], [4], [5], and [6].

Competing interests

The IZA World of Labor project is committed to the IZA Guiding Principles of Research Integrity. The authors declare to have observed these principles.

© Junsen Zhang and Jia Wu