Targeted policies to improve the incomes of migrant workers needed to expand the middle-income group

There are various ways to describe the middle-income group. According to China's National Bureau of Statistics, a household with an annual income ranging from 100,000 yuan ($15,680) to 500,000 yuan is a middle-income household. By this definition, in 2018, China had around 400 million people in the middle-income group, accounting for 28 percent of the entire population.

When China launched the reform and opening-up policy more than four decades ago, the country's then leader Deng Xiaoping said: "The country should allow some regions and people to get rich first, and then gradually push for common prosperity." After more than four decades of development, China stepped into the second phase, of realizing common prosperity, when those who have already become rich help the others get rich. Because of the outbreak of the COVID-19 pandemic, the income and consumption of workers in some regions have declined, leading to temporary shrinkage in the size of the middle-income group.

It is time for China to expand its middle-income population from 400 million to about 800 million to 900 million in the next 10 to 15 years, raising the proportion of the middle-income population to roughly 60 percent.

If the country's real GDP growth rate is 5 percent on average in the period from 2019 to 2030 and the inflation rate stays at 2.5 percent, the nominal GDP growth rate will be 7.5 percent, and the disposable income of residents will increase accordingly. In that case, by 2030, the country's middle-income population will rise to 750 million people, accounting for 51 percent of the total, while the proportion of the low-income group will shrink to 45.5 percent and that of the high-income group up to 3.3 percent.

The findings of our research suggest that of the 370 million people likely to join the middle-income group by 2030 (a comparison with the number in 2018). In 2018, middle-income migrant workers accounted for 4.1 percent of the total population, up from 2.2 percent in 2013, contributing 27 percent to the increase in the country's middle-income population.

The spending power of migrant worker families far exceeds that of rural families. But as they do not have access to social welfare and security measures, which are available to those holding urban hukou (household registration), migrant families tend to save more and spend much less than urban families. In addition, most migrant workers are employed in the private sector and thus have relatively low incomes and unstable jobs, and many are not covered by public health and old-age insurance. These factors impede their income growth and consumption ability.

In the pursuit of common prosperity, the key to expanding the middle-income group lies in providing equal access to opportunities for upward mobility, and boosting the human capital of low-income earners. A society with a fair environment for personal development will galvanize people's enthusiasm to work and create wealth, which in turn will promote efficiency and drive economic growth. Therefore, some targeted measures and policies should be taken to help more migrant workers join the middle-income group.

Currently, small and medium-sized cities and some provincial capitals have abolished their hukou restrictions. Other cities should change their hukou policies from a "positive list" model-which allows migrant households that meet required criteria to obtain a hukou-to a "negative list" model-which denies hukou to those failing to meet the requirements. These cities should then try to shorten the negative list. Differentiated policies and negative lists should be adopted for core areas and non-core areas in megacities such as Beijing and Shanghai, as well as small and medium-sized cities in urban clusters, which should ease the restrictions on hukou.

Building affordable housing in big cities could help solve the housing problem of migrant workers who pay their social insurance contributions in cities where they work, thus stabilizing employment and contributing to local economic development. Efforts could be made to build small apartments, say, 40 to 60 square meters in size, to lower construction costs and provide affordable homes to migrant workers.

Equal access to basic public services such as education, healthcare and social security should also be promoted. More efforts should be made to unify the social security and medical insurance systems of rural and urban areas, and to allow children from migrant families who hold a residence permit, instead of a hukou, which is harder to obtain, to enter urban schools.

The government should also provide employment training to migrant workers and help them find jobs. Vocational and technical schools and enterprises must be encouraged to provide job training to migrant workers by providing subsidies or fiscal and credit preferential policies to them. The country should consider giving fiscal and financial support to cities that absorb large numbers of migrant workers.

Lastly, the government must promote market-based transactions of rural collective construction land for commercial use and the transfer of rural residential land to increase migrant workers' income from property. The revenues from the transaction of rural collective construction land and transfer of rural homesteads should be used to improve the social security system in rural areas, which will help increase rural people's incomes and reduce their reliance on revenues from farming land, while increasing the efficiency of land use.

The author is deputy director of the Economic Affairs Committee at the National Committee of the Chinese People's Political Consultative Conference. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.