Analysis of Unemployment During Transition to a Market Economy:

Abstract

Using self-gathered data and the hazard model, we analyzed the reasons laid-off workers in the Beijing area remained unemployed. For the laid-off workers who were eventually reemployed, we used the Tobit model to explain the change in wages between their pre- and post-layoff employment. The results of these analyses revealed that, although China’s policy of laying off workers from state-owned enterprises without completely severing the relationship accelerated the establishment of a labor market to some extent, with prolonged time the laid-off workers are out of work, the policy was an obstacle to the labor-marketing effort. Moreover, it was an obstacle to implementing and improving an unemployment benefits system. They also showed that laid-off workers with worked experience under the traditional system need to be reeducated to enable them to adapt to the new economic environment as well as to be taught new skills, especially those workers who were managers. Additionally, the "lay-off" is not only a policy in special phase during the process of Chinese economic system reform, but also a special phenomenon, which is the structural unemployment revealed from Chinese economic system. This unemployment due to changes in industry structure means that the government must adopt a more active employment policy