Occupational segregation and earnings inequality: Rural migrants and local workers in urban China

- We study earnings inequality between rural migrants and local workers in urban China.
- We focus on occupational segregation versus unequal pay within the same occupations.
- Rural migrants' lower earnings are largely attributable to occupational segregation.
- The occupational segregation is the most severe in government/state institutions.
- The occupational segregation is the least severe in the private sector.

This article examines the central role of occupation as the “reward packages” in creating earnings disparities between rural migrants and local workers in urban China's labor markets. Analyses of data from the population mini-census of China in 2005 show that, rural migrants' earnings disadvantages are largely attributable to occupational segregation (between-occupation variation) by workers' household registration status (hukou) rather than unequal pay within the same occupations, but surprisingly they enjoy a slight earnings advantage in lower-status occupations (within-occupation variation). Even after controlling for education and other characteristics, occupational segregation by hukou status continues to exist. The occupational segregation is the most severe in government agencies/state institutions and the least severe in the private sector, leading to earnings disparities between rural migrants and urban local workers in different work unit sectors. Our findings shed new light on how government discriminatory policies could affect occupational segregation and thereby create inequality among social groups in urban China.