Job precarity and earnings inequality in contemporary China

Abstract Job precarity is a core mechanism of workplace inequality that underlies economic segmentation between organizational insiders and outsiders. Yet less is known about how institutional contexts affect dual employment arrangements that create differential rewards between long-term and short-term workers. Drawing on institutional distinctions between China’s state and private sectors under marketization, this study shows how compensation for employment relations differ across sectors, how sector-specific returns vary with marketization levels, and how these differential returns contribute to overall earnings inequality within sectors. In the private sector, labor flexibility helps offset the costs of maintaining long-term employment through lower pay for short-term workers. In the state sector, the socialist personnel system preserves advantages for permanent employees, whereas the economic egalitarianism norms constrain the sustainability of these advantages under dual employment relations. Analyzing data from the nationally representative China Family Panel Studies 2018 and leveraging provincial marketization variations, I find that the state sector has less employment precarity than the private sector overall but imposes a larger earnings penalty on short-term employment. This penalty is smaller in more marketized provinces, mitigating overall earnings inequality associated with employment type within the state sector. In the private sector, however, both forms of inequality are larger in more marketized provinces. These within-sector earnings penalties and their association with marketization are most pronounced among low-paid workers, and cross-sector disparities are concentrated between government and public institutions and private enterprises. The findings challenge the view that marketization uniformly worsens precarious workers’ earnings and demonstrate the institutional foundations of labor market inequality in contemporary China.