Migrant workers and informal economy in urban China: an ethnographic study of a migrant enclave inGuangzhou

Abstract

China's internal migration has drawn extensive interest since the 1980s, and numerous studies have focused on migrant workers who are employed by the "world’s factories". However, less attention has been paid to migrant workers participating in the informal economy in urban China. In fact, the informal economy, which refers to income-generating activities that are not regulated by the state, has been estimated to have expanded dramatically over the past two decades, and migrant workers comprise the overwhelming majority of participants in the informal sector. These informals are mostly self-employed or paid employees working for informal factories hidden in the urban villages. This study, taking an urban village known as Kangle village in Guangzhou as its research site, adopts an ethnographic method to understand the lives of China's migrant workers engaged in the informal economy. It attempts to (1) examine the institutional environment for the expansion of the informal economy in urban China, (2) understand the individual choices of migrant workers in terms of being formal or informal, (3) explore their economic performance and (4) discover whether the informal economy could represent an alternative for migrant workers to achieve upward mobility in receiving cities. It is found that institutional factors, including policy practices of the state, regulation enforcement by local government and the relative autonomy of the migrant enclave all contribute to the development of the informal economy in urban China. Individual choices in being formal or informal are based primarily on participants' rational calculations comparing costs and benefits; howbeit these choices have actually been largely affected by the social networks of migrant workers. Migrant workers engaged in the informal economy receive relatively higher incomes than their counterparts in the formal sector. However, the higher monthly incomes for the wage employees in the informal economy can also be viewed as compensation for their willingness to undertake the risky, dirty, long-hour informal jobs. Social networks have also played an essential role in the economic performance of migrant workers in the informal economy. For instance, the strong social ties of migrant workers largely facilitate the process of becoming self-employed or migrant entrepreneurs by providing market information, financial support and labor resources. Also, the use of social networks reduces the transaction costs between different business owners in the informal sector where formal contracts are absent. Economic stratification among the migrant workers in the urban village is obvious, and a small number of migrants have achieved economic success by becoming self-employed or migrant entrepreneurs. Nonetheless, migrant entrepreneurship cannot continue to be a sustainable alternative for the majority of migrant workers to achieve upward mobility due to the vulnerability of the informal economy and the absence of institutional inclusion for the participants in the informal economy. It is thus suggested that society and government rethink and adjust current institutional settings to improve work conditions, promote entrepreneurship, and facilitate the formalization of the informal economy on the one hand; meanwhile initiate top-down reforms for the integration of migrant workers in both the formal and informal sectors.