With an influx of 300,000 rural migrants back from China's cities in the past two months, the central Hubei Province has ordered some companies to seek approval for job cuts to stabilize the job market.

Under an emergency program to deal with rising unemployment, large state-owned enterprises (SOEs) in Hubei were this month required to reduce salaries first before dismissing staff. Large SOEs and medium-sized local companies need to secure approval for cuts involving at least 50 people.

Struggling small businesses in counties and townships were urged to refrain from cutting jobs intensively so as to ease the burden on the local government-financed unemployment insurance fund.

The order along with government measures such as expanding small loans, easing market access and subsidizing vocational training came amid indications that economic growth and exports are slowing.

With production cutbacks and closures of export-oriented companies on the east coast amid weakening demand, Hubei, which had a yearly rural labor outflow of 7 million, was the first of the central and western provinces to respond.

About 200,000 returning workers have been re-employed locally in two months. As the global financial crisis affects the economy, a total of 600,000 are expected to come back by year end, say local officials.

Hubei Provincial Labor and Social Security Bureau deputy director Zhou Layuan was confident the province's employment situation would remain stable before the Spring Festival, which falls on Jan. 25, 2009 and an important occasion of family reunion.

"For a clear picture of the impact of the crisis on Hubei's employment, we should wait until after the Spring Festival. It all depends on how the national economy plays out and how many rural migrants come home," he said.

China's migrant laborers, estimated at between 130 million and 150 million, are a significant economic indicator as their migration from poverty-stricken rural areas to the cities since early 1980s was voluntary and powered by their simple longing for a better life.

NATIONAL ALERT

One signal of trouble was the suspension of plans to raise the minimum salary by the Ministry of Human Resources and Social Security (MOHRSS).

In an effort to "stabilize labor and management relations", the ministry this week allowed some service-oriented companies to adopt flexible working hours and pay.

"With some companies, especially labor-intensive small and medium-sized firms struggling, the employment market has become severe while social security is facing new difficulties, including rising labor disputes," said an MHRSS statement.

The top priority was to take concrete measures to help enterprises tide over the tough times and stabilize employment, it said.

Local labor and social security authorities were ordered to monitor the operations of struggling enterprises and be alert to potential job cuts so as to defuse large cutbacks. Meanwhile, workers must have easy access to labor dispute arbitration to avoid the occurrence of mass incidents.

The ministry stipulated that migrant workers who lost jobs after having worked consistently for at least six months must receive one-off subsistence benefits and government-funded vocational training. Salary defaults should be handled as priorities to protect the interests of migrant laborers and social stability.

Large state-owned enterprises were required to shoulder their social responsibilities to avoid firing workers if possible. The ministry is also considering a plan to subsidize industries with unemployment insurance.

PROACTIVE RESPONSE

One new policy effective as of Jan. 1 in Hubei is to use unemployment insurance to subsidize companies that offer vocational training for in-house re-employment and reward enterprises that have paid insurance premiums for more than two consecutive years without layoffs.

Under current regulations, unemployment insurance can only go to the jobless as living subsistence or subsidies for technical training.

The central government has drawn up plans to create jobs by supporting labor-intensive industries, urging banks to lend to small and medium-sized companies and encouraging self-employment and entrepreneurship.

From next year, Hubei Provincial Government will evaluate officials on whether they meet targets for new self-employment posts and businesses.

In the next five years, the province hopes to help 50,000 people start their own businesses and create 200,000 new jobs every year.

To that end, the small loan ceiling for individuals has been more than doubled from 20,000 yuan to 50,000 yuan, while that for labor-intensive companies is up from 2 million to 3 million yuan. Commercial banks will receive government rewards, with the amount designated at 1 percent of their total small loans.

In Guangdong, where factory closures put many rural migrants out of work, measures were enacted to facilitate rural labor transfers within the province.

All companies that had signed employment contracts with rural workers and paid social security insurance for more than a year would receive government subsidies. Firms making outstanding contributions to local rural labor employment would be rewarded by the provincial government.

Firms with a significant rural labor employment ratio would receive tax breaks. Although very few rural workers have returned to Chongqing, another major exporter of labor, the municipality has pledged preferential land, tax and loan policies if they want to start their own businesses.

FUTURE OF MIGRATION

Qu Qiwen, of the Wuhan Commerce Bureau, said the global financial crisis has forced China to change its export-oriented economic growth. "If the migrant labor in central regions returned to the east, it would indicate our failure to rebalance the economy and narrow regional disparities."

Central regions, including Hubei, Hunan, Jiangxi, Henan, Anhui and Shanxi, with advantages in labor and resources, should seize the opportunity for development relying on domestic consumption, he said.

As rural workers abandoned their farmland for higher pay and better lives in the east, China's interior has long been plagued by labor shortage. In Hubei, the yearly average spread stands at 500,000, with the seasonal peak hitting 700,000.

However, an increasing number of migrant workers are returning to settle down in Hubei, starting their own businesses with the hard-earned savings, knowledge and technologies.

In Yangxin County alone, about 2,500 former migrants have set up more than 500 businesses in the past three years, generating 3.5 billion yuan in industrial output and 180 million yuan in tax revenue last year.

"We can't leave the problems to the rural areas. Slow as it is, urbanization is a viable way to reduce rural poverty and boost consumption," said Zhou Layuan, of Hubei labor authority. "Migrant workers who have made significant contributions to urban prosperity deserve decent and better lives. It's the government's duty to help them prosper in cities."

Migrant rural labor has become a significant component of China's industry, accounting for 58 percent of the manufacturing workforce, 52 percent of service industry employment and 68 percent of processing workers. In construction sector, the ratio is as much as 80 percent, official figures show.

Editor: Yan