Building a Unified and Inclusive Labor Market

What kind of labor market does common prosperity actually require? The development of the labor market results from a combination of market forces and institutions. The introduction of an institutional perspective implies strengthening the inclusiveness of the labor market. It should ensure that employment opportunities are open to all workers equally, that labor compensation is not influenced by factors other than job performance, and that workers are given appropriate protection and a voice. Compared with the requirements, there are three more prominent problems in the current Chinese labor market. Firstly, the labor market presents an obvious dualistic structure along many dimensions such as urban and rural areas, regions, and industries, and free flow is hindered. The segregation of the labor market not only widens the wage income gap, but is also not conducive to giving full play to the advantage of the country’s bountiful labor resources. Secondly, the structural contradiction between supply and demand leads to the coexistence of unemployment and labor shortage, and the flexible employment in new industries is likely to impact the effectiveness of the institutional arrangement of the current market. Third, insufficient labor protection restricts the market’s ability to allocate labor resources dynamically. Under the existing social security system, in particular, the unemployment insurance system needs to be improved, and there is still room to amplify the voice of workers. With the goal of common prosperity, China should establish a unified and inclusive labor market. First, by reducing inequality among different groups of people in terms of employment, livelihood, and social security, the barriers in the labor market at the urban–rural, regional, and industry levels should be broken down. Secondly, we can guide employment preferences, strengthen skill training, and promote industrial transformation and upgrading to address the structural mismatch between labor supply and demand. In particular, we can actively explore the institutions of labor protection that are compatible with flexible employment patterns so that the labor market system can keep pace with the development of new business models. Finally, the protection of workers should be strengthened through enhancing employment protection, upgrading the level of social security pooling, strengthening the function of unemployment insurance, and amplifying the voice of workers.