Market Transition and Gender

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Market Transition and GenderSegregation in Urban Chinan

Xiaoling Shu, University of CaliforniaDavis

Objectives. This article analyzes the impact of the new form of economic segmen-tation, which emerged in urban China during the market transition, on gendersegregation and earnings differentials. Methods. I compare both over-time andacross-city change in gender segregation, and use a series of multi-level cross-classified models based on data at three levels: a 1995 national sample of individualworkers, industry-sector data for 1990 and 1995, and city-level data for 1995. Re-

sults. Gender segregation by ownership sector has declined over time now that thestate sector has become differentiated and its relative economic advantages wanes.Both earnings differentiation and gender segregation among industries have in-creased with marketization. In the most marketized cities, the earnings of workers ofboth sexes in jobs with high rates of female entry are penalized, indicating thatmarketization exacerbated the negative effect of job feminization on earnings. Con-clusions. These findings lend support for the queuing perspective that a decline in

jobs relative wages leads to feminization. The making of the Chinese marketeconomy has created a new set of institutional arrangements, which includes thatbetween job feminization and wages.

Research on the impacts of market transition in China is largely motivatedby the market transition debate centering on the question of whether themarket is an equalizing force. This perspective argues that because a marketeconomy honors efficiency and productivity, those who participate in theactual production and distribution of products and those with human cap-ital are expected to gain from this transformation (Nee and Matthews,1996). However, empirical research informs us that Communist Partymembers still enjoy economic returns, and that income disparity resultingfrom educational attainment has increased (see Bian (2002) for a review),and that the amount of overall income inequality has increased (Griffin andZhao, 1993; Khan and Riskin, 1998).

Studies on the influences of market transition on gender inequalities alsorelate to this debate on market transition. These studies analyze the market

nDirect correspondence to Xiaoling Shu, Department of Sociology, University of Cal-iforniaDavis, One Shields Ave., Davis, CA 95616 [email protected]. The data used in

this study are publicly available to researchers interested in gender segregation in urbanChina. The author thanks two SSQ anonymous referees for their helpful comments. Thisresearch was partially supported by a Faculty Research Grant, Academic Senate, University ofCaliforniaDavis.

SOCIAL SCIENCE QUARTERLY, Supplement to Volume 86r2005 by the Southwestern Social Science Association


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transition influence on how men and women obtain nonfarm business orwork opportunities in rural China (Entwisle et al., 1995; Matthews andNee, 2000; Michelson and Parish, 2000). They also examine changes ingender gap in human and political capital, job mobility, labor market

placement, and earnings in urban China (Parish and Busse, 2000; Shu andBian, 2002, 2003). There are both positive and negative changes in genderinequalities: increasing marketization in rural China increased womensemployment, narrowed the gender gap in contributions to household in-come, and increased household power for women (Entwisle et al., 1995;Matthews and Nee, 2000; Michelson and Parish, 2000); marketization alsoresulted in increased discrimination against women on the part of family(Davis, 1995; Entwisle et al., 1995; Michelson and Parish, 2000). Thegender gap in work earnings in urban China has remained largely un-

changed (Parish and Busse, 2000; Shu and Bian, 2002, 2003).This stability in gender gap in earnings in urban China results from

simultaneous changes, some of which drive this disparity in opposite di-rections. The significance of education and occupation- and industry-placement has increased, and the significance of affiliation with the statesector, party membership, and seniority has declined in the most marketizedlocations (Shu and Bian, 2003). Although marketization has led to phe-nomenal transformations in the economic order, these changes have not ledto changes in gender inequalities in work wages.

What mechanisms maintain the existing gender gap in earnings? Are theresigns of incipient transformation that will lead to further changes? Parishand Busse (2000:231) observed that industries in the sales and service sectorswere experiencing income declines and feminization in the early 1990s, andthat firms with higher percentages of female employees paid lower wages totheir employees. Shu and Bian (2002, 2003) also noted that the relative riseand decline among ownership sectors, occupations, and industries, and therelated changing patterns of gender segregation among them, played animportant role in maintaining the existing gender gap in earnings. Yet, there

has been no direct analysis of these mechanisms sustaining an earnings gapduring market transition.

This article aims to bridge this gap in our knowledge. Although we havesubstantial knowledge about what has given rise to and maintains patterns ofgender segregation in capitalist market economies (Reskin and Roos, 1990),we know little about those patterns in transitional economies in which marketmechanisms, strong state participation, and intervention coexist. It is unclearhow men and women are placed in the segmented labor markets and how thediffering wage structures embedded in these segmented labor markets might

have resulted in differential earnings before and after the rise of marketization.We therefore sort out the enduring features of gender segregation, and thefleeting patterns that wax and wane with changing circumstances.

This research is inspired by analyses of gender segregation in industri-alized capitalist countries (Reskin and Roos, 1990; Reskin, 1993; Padavic

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and Reskin, 2002). Employers rank workers of both sexes based on estimatesof worker productivity and costs. The process of specifically matching aworker with a job depends on the workers rank in the labor queue and theshape of the job-distribution queue. Both queues vary from changes in the

characteristics of occupations and industries, new developments in marketconditions, the emergence or demise of technologies, shifts in worker char-acteristics, and modifications in ideological or legal endorsement for genderequality.

I apply this perspective to the Chinese labor market by analyzing how thenew logic of economic segmentation introduced by Chinese marketizationtransforms the shape of job distribution, and thus changes the pattern of sexsegregation. Here, I define job as a specific occupation in a specific industryin a specific ownership sector. I base my analysis on data at three levels: a

national sample of individual workers, industry-sector-level data, and city-level data. I describe both the over-time and across-city trends in sex seg-regation by ownership sector, industry, and occupation. I then analyze theassociation between change in earnings in jobs and change in sex compo-sition, treating change in sex composition as resulting from both employersand workers responses to changes in the characteristics of the job queue.Lastly, I use a series of cross-classified multi-level models to estimate theeffects of marketization and job feminization on earnings.

These multi-level data sets allow me to analyze processes occurring at all

three levels and the interactions among them. I simultaneously considercharacteristics of individual workers, characteristics of the cities in whichthey reside, and characteristics of the economic segments (industry sector) inwhich they work. I estimate the impact of marketization and characteristicsof industry sectors, sex composition, and rate of feminization on genderwage differentials. I also estimate whether these two processes are connect-edin particular whether the impacts of sex composition and rate of fe-minization on earnings increase in the most-marketized cities.

I use two of the most frequently used measures of marketization.1 The

first is the passage of time (Bian and Logan, 1996; Gerber and Hout, 1998;Nee, 1989, 1991; Zhou, 2000). The change between 1990 and 1995 is seenas indicative of the effects of marketization, assuming that the market reformdeepens over time. The Chinese urban market reform accelerated during19901995 when three major reforms fundamentally changed the landscapeof the urban economy: price reform led to the bulk of the economy adoptingmarket pricing; tax reform created a largely level field among all ownershipsystems; and labor reform granted state enterprises the ability to hire andfire labor freely (Naughton, 1995; Meng, 2000).2 A second measure of

1Other measures were economic-growth rate (Xie and Hannum, 1996) and mode ofmarket exchange (Nee, 1996; Parish and Michelson, 1996).

2By 1995, more than a third of industrial workers were on the labor-contract system(Meng, 2000:82) and direct foreign investment reached 20 percent of total investment(Naughton, 1995).

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marketization taps across-city variations by an index of the states absencefrom the labor, product, and capital markets in a city (Bian and Zhang,2002; Shu and Bian, 2002, 2003). The Chinese market reform has beendeliberately implemented with a regional dimension (Shirk, 1989; Linge and

Forbes, 1990; Xie and Hannum, 1996); a few cities, mostly coastal cities,were granted preferential fiscal and tax treatments as exemplary models tolead the rest of the country.

Market Transition and Economic Segmentation

A central feature of Chinas transformation toward a market economy hasbeen the shift from an exclusively redistributive mechanism to a hybrid

economic system with a market element (see Bian (2002) for a review). Priorto economic reform, economic segmentation was determined by the unequalbargaining power of organizations with regard to the socialist central plan-ning mechanism (Domanski, 1987; Lin and Bian, 1991; Walder, 1992).Because state enterprises ranked highest in this process, they received priorityin allocations of investment, labor, and material, as well as greater organ-ization size, advantageous benefits, and authority. This system of economicranking based on the position in the hierarchy of the planned economypersisted in prereform China.

Economic segmentation bestows greater power on some employers in thefactor and product markets, thus giving rise to a sectioned labor market:workers in the oligopolistic sector earn more than those in the competitivesector (see Wallace and Kalleberg (1981) for a review). In prereform China,wage disparities were redistributive in nature and regulated largely by a state-collective dualism (Whyte and Parish, 1984; Walder, 1992; Bian, 1994). Sothe labor market segmentation was manifested as differentiation betweenownership sectors. The collective sector sponsored by local authorities andcommunities ranked lower and the state sector was more centrally located;

therefore, wage disparities were regulated largely by a state-collective du-alism: employees in the collective sector had lower salaries, fewer fringebenefits, and lower social status.

The new economic order ushered in a new logic of economic segmen-tation, thus a new pattern of economic differentiation (Bian and Zhang,2002). This changed economic segmentation is expected to have profoundimplications for the labor market and individual workers. Two importantchanges in the logic of market segmentation have emerged.

Differentiation of the State Sector

Because Chinas market transition is a state-led endeavor, the state hasstrategically maintained both protection of and control over vital industries



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in this process. It continues to control and regulate industries important tothe communist rule (e.g., banking and finance, telecommunication andtransportation, and education and mass media). Industries that exercisemacroeconomic regulation, provide vital national utilities, and maintain

political and ideological hegemony all remain under the firm fists of the state(Bian and Zhang, 2002). Only state enterprises are allowed to operate theseindustries. Conversely, those industries deemed less essential (e.g., com-merce, service, construction, and manufacturing) were gradually opened tomarket penetration and eventually face complete market competition. Bothstate and nonstate enterprises participate in market competitions in theseindustries. Consequently, the state sector is divided into two segments: astate monopoly or oligopoly, in which state enterprises dominate, and anopen or competitive sector, in which enterprises compete with others

for profits (Bian and Zhang, 2002).This differentiation among state enterprises also led to a differentiation of

state jobs. Government enterprises in the monopoly/oligopoly sector con-tinue to enjoy high profit margins. Some create and collect rents fromeconomic entities under their jurisdiction, while others, with the statescontinuing support, maintain their dominant positions in the product andcapital markets and reap high profit margins. Employees of these enterprisesthus continue to enjoy high monetary incomes and nonmonetary benefits,maintaining high earnings in this oligopoly sector (Naughton, 1995; Meng,

2000). On the other hand, state enterprises in the competitive/open sectorreceive little or no financial support or protection from the state and facesteep market competition. Not only do they compete with other state en-terprises, but also with firms in the fast-growing new sector, including do-mestic private businesses, foreign multinationals, and other hybrid forms ofenterprise.3 Many of them have failed to survive. Employees in these stateenterprises no longer enjoy an advantageous position and their salaries eitherstagnate or are reduced (Naughton, 1995; Meng, 2000).

The Rise of the New Sector

Enterprises in the new sector are granted access and the rights to open-market competition and some of them have gained substantial market share.

Without redistributive government policies providing raw materials,financial subsidies, and investment capital, fewer state enterprises enjoy

3

Despite these similarities between state firms in the open market and the emerging firms,there remains a fundamental difference in ownership and management function betweenthese two types of firms: the new firms themselves are responsible for the full risks while statemanagers make decisions without full responsibility for the risks (Meng, 2000), so state firmsare less likely to function completely under the principle of rational profit maximization(Walder, 1986). These two kinds of firms engage in different labor practices in hiring andfiring workers (Keister, 2002).



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dominance in the open market. Both state and nonstate firms are fairplayers in a leveled field. The new sector encompasses a variety of firmsfrom sizable conglomerates with foreign and domestic investments to hy-brids to multinationals. Firms in this sector have become new engines of

economic growth. The employment share of the urban new sector increasedfrom 0.2 to 16.4 percent, while the share of the state and collective sectorsdeclined from 99 to 83 percent by 1995 (China State Statistical Bureau,1996). Share of direct foreign investment jumped from 6 percent in 1990 to20 percent in 1993 (Naughton, 1995).

Economic Segmentation and Gender Segregation

The segregation of women in female-typed, low-paying occupations isregarded as the most direct source of the gender gap in earnings (England etal., 1988; England, 1992; Marini and Fan, 1997). This institutional per-spective emphasizes the effect of a gendered labor market, pointing to dif-fering reward structures for male- and female-typed jobs. Both men andwomen in predominantly female occupations are paid less (England et al.,1988; England, 1992).

Women consistently received less advantageous placement in prereformChina (Whyte, 1984; Bian, 1994; Bian and Logan, 1996). Women were

more heavily concentrated in the collective sector, which offers significantlylower wages than the state sector (China State Statistical Bureau, 1997:10607, Table 49). The disproportional placement of men and women workersin the two economic sectors was a significant source of the gender gap inearnings (Bian, Logan, and Shu, 2000).

In a state redistributive economy, labor was one of the resources strictlycontrolled by the government. State personnel offices at various levelsmatched workers with jobs, and almost all the workers remained in the samefirm for the rest of their lives (Naughton, 1995). This practice of lifetime

employment continued until 1984 when the employee contract systemwas implemented for all new employees (Naughton, 1995). In 1986, all thestate employees converted to the contract-employment system by signingcontracts of limited employment length with their employers, ending thepermanent-employment system (Naughton, 1995). Since then, labor marketreform proceeded at an even faster pace. State firms, particularly those thatwere unprofitable, cut down on their redundant employees in attempt tobecome more efficient (Keister, 2002).

Economic reforms have brought several changes to labor force placements.

Market competition grew both within and outside the state sector, resultingin rising wage levels in the new sector and differentiated wage levels withinthe state sector. Increasingly, wage inequalities became associated with in-dustry and occupation, as industries indicate the power of the employer infactor and product markets, and occupations tap the technology, production



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process, and forces in the market for products. Job assignments by stateredistributors were gradually eliminated and unemployment rose signifi-cantly, pushing workers to locate jobs in emergent labor markets.

These changes have had important implications for the structural features

of job queues. As argued by Reskin (1993), the labor market functions as ifcomprised of ordered elements of labor queues and job queues. Job queuesand labor queues govern labor market outcomes: employers hire workersfrom as high in the labor queue as possible, and workers accept the best jobsavailable to them. Employers preference for men, combined with bothmens and womens inclination toward better-paying jobs, lead good jobs tobe filled by men and poorly-paid jobs by women.

This perspective is based on three assumptions, all of which presume theexistence of a labor market. The first assumption is that employers have the

power to hire and fire. A 1992 survey of 288 firms shows that almost 80percent of state and collective firms had the decision-making power todismiss workers, and another 79 percent had partial power (Meng,2000:113); another survey of 800 firms indicates that three-quarters of thenew workers in state firms and 95 percent in nonstate firms were hiredindependently by the firms (Keister, 2002:183, Table 4). The second con-dition is that workers have information about job conditions. Because evenadvanced market economies depend on contact networks to make up fordeficiencies in circulating labor market information (Granovetter, 1974),

half of Chinese work-changers utilized helpers in their job shifts (Bian andAng, 1997). The last assumption is that job shifts are permitted. A 19931994 17-city sample show job shifts both between sectors and industries(Zhou, Tuma, and Moen, 1997). The development of labor markets wasalready well underway by 1995.

As the conditions that shape the job queues and labor queues shift, pat-terns of gender segregation also change. First, changes in the available poolof jobs or workers can create a mismatch between the number of workers ata certain level in a labor queue and the number of jobs at the corresponding

level of the job queue. When job growth creates a shortage of male workers,employers have to hire female workers. Thus female workers are more likelyto enter jobs when there is an expanding demand (Oppenheimer, 1970;Richardson and Hatcher, 1983; Cohn, 1985).

Second, male workers colonize jobs that have become more attractive thantheir own. Men moved into womens jobs in radiography after salary andworking conditions improved. In the United States, men have been replac-ing women as coaches in womens sports following an increased budget forwomens collegiate sports programs (Reskin and Roos, 1990).

Last, women are more likely to enter male-dominated occupations withdeclining earnings, mobility prospects, or autonomy. Women are morelikely to enter these jobs at such times because men are less concerned withrestricting womens entry and are themselves leaving these jobs. It becomeseasier for women to enter those jobs when they become less desirable



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(Reskin and Roos, 1990). In the 1950s, bank tellers were undercompen-sated, men thus left and found more lucrative other jobs, while womenentered into this occupation in large scale (Strober and Arnold, 1987).

Hypotheses

I argue that the new logic of economic segmentation during marketizationhas important implications for gender segregation and pay differentials.During Chinas market transition, important changes took place in thestructural features of the job queues. First, rewards deteriorate for those inthe state sector in open competition relative to other jobs, making them lessattractive. Thus the economic differentiation by ownership sector becomesless salient while occupation- and industry-based differentiation grow to beincreasingly significant. Similarly, gender segregation follows this pattern ofeconomic differentiation. Second, rewards to some jobs in the new sectorrise relative to other jobs, making them more attractive. Third, growth in thenew sector creates a shortfall of workers and thus could lead to feminizationof some jobs in the new sector.

H1: The higher the earnings differential among a form of economic segments,the higher the degree of gender segregation among these segments. Because

marketization is associated with declining earning differentials amongsectors and increasing earnings differentials among industries, (a) gendersegregation by ownership sector declines with marketization and (b) gendersegregation by industry and occupation increases with marketization.

H2: Jobs that have experienced either a decline in earnings or rapid growthexperience feminization: (a) the lower the growth of earnings in a job, the

faster the female workers entry rates into these jobs and (b) the faster thegrowth of the size of a job, the faster the female workers entry rate intothese jobs.

H3: Jobs that have experienced feminization pay their employees less, and thistrend exacerbates with marketization: (a) worker earnings in jobs withhigh rates of female entry are lower than those in jobs with low rates of

female entry and (b) earnings penalty to those in feminizing jobs is higherin the most marketized cities than in less marketized cities.

Data and Measures

This project is based on data at individual, industry-sector, and city levels.The individual-level data are from the urban surveys of the 1995 ChineseHousehold Income Project (CHIP) (Riskin, Zhao, and Li, 1995), whichfollow a multi-stage sampling methodology. Eleven provinces were selected torepresent varying urban conditions in China, then 69 cities and towns were



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selected. These surveys collected information from all household members. Iinclude in the samples all household members who are active in the laborforce and aged 18 and older. Fourteen county headquarters, where 1,174individuals reside, for which I have no reliable macro-level data were excluded.

A second data source is the China Statistical Yearbook and StatisticalYearbooks of selected cities for 1995 (Shu and Bian, 2002, 2003). Threevariables, the proportion of nonstate employees, the proportion of industrialoutput generated by nonstate enterprises, and the proportion of foreigninvestment, were used to construct an index of marketization based on aconfirmatory-factor analysis (Shu and Bian, 2003).

A third data source is the 1990 and 1995 Labor Statistics Yearbooks(ChinaState Statistical Bureau, 1998). For both 1990 and 1995, I compiled threevariables for 11 industries in state, collective, and new sectors: average salary,

number of male workers, and number of female workers. Because no dataare available for occupational wages, and the occupational classification usedin the CHIP data is different from the census categories, I only use variablesto describe industry and ownership sector of jobs. Occupation was a controlvariable in the multi-level analysis.

Analysis

The analysis involves three steps. I first describe both over-time andacross-city shifts in an index of sex segregation by ownership sector, indus-try, and occupation. I then analyze the association between change in earn-ings of industry sector and change in sex composition, treating change in sexcomposition as resulting from both employers and workers responses tochanges in the job queue. Last, I estimate a multi-level cross-classified modelto simultaneously consider the effects on earnings: feminization at industry-sector level, marketization at city level, and individual characteristics.

Changing Patterns of Gender Segregation

Figure 1 shows change in the index of sex dissimilarity in 19781995 bysector, industry, and occupation.4 During this period, sex segregationamong ownership sectors declined by 51 percent (from 15.6 to 7.7), whilesex segregation by industry and occupation increased by 6 percent (from

4To document the dynamics in gender segregation since the economic reform and to makeindustry categories consistent for all the years under study, I used only a small number of

categories, which might underestimate the overall gender segregation. These categories arethree sectors (state, collective, and new), 11 industries (manufacturing; mining; construction;transportation and telecommunication; commerce; real estate and social service; publichealth, sports, and social welfare; education, culture, and mass media; scientific research andtechnical development; finance, banking, and insurance; and party and government agencies),and six occupations (technical and professional; managers and administrators; clerical; com-merce and sales; service; and industrial workers).



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Year

19

95

19

94

19

93

19

92

19

91

19

90

19

88

19

87

19

86

19

85

19

84

19

83

19

82

19

81

19

80

19

79

19

78

Indexofsex

dissimilarity

20.0

18.0

16.0

14.0

12.0

10.0

8.0

6.0

Sector

Industry

Occupation

FIGURE 1

Index of Sex Dissimilaritya for Urban China in 19781995, by Sector,b Industry,c

and Occupationd

aIndex of gender segregation is defined as S 12

PP

1

Ms Fsj j; where Ms5 the

percentage of males in sector, occupation, or industry s, Fs5 the percentage ofmales in sector, occupation, or industry s, and P5 total number of sectors, oc-cupations, or industries.bSector statistics are from Chinese Labor Statistical Yearbooks for cities and

towns. I identified three sectors: state, collective, and new.cIndustry statistics are from the 1982 Third Population Census, the 1987 One-Percent Population Sample, 1991 and 1996 Labor Statistics Yearbook, excludingthe agriculture, forestry, husbandry, and fishery industry. I measured 11 industries:manufacturing; mining; construction; transportation and telecommunication; com-merce; real estate and social service; public health, sports, and social welfare;education, culture, and mass media; scientific research and technical develop-ment; finance, banking, and insurance; party and government agencies.dOccupation statistics are from the 1982 Third Population Census, the 1987 One-Percent Population Sample, the 1990 Fourth Population Census, and the 1995One-Percent Population Sample, excluding the agriculture, forestry, husbandry,

and fishery industry. I identified six occupation categories: technical and profes-sional; managers and administrators; clerical; commerce and sales; service; andindustrial workers.SOURCE: China State Statistical Bureau (1998); Research Institute (1991).



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15.0 to 15.9) and 103 percent (from 9.1 to 18.5), respectively.5 Except forone year, the decline in sex segregation among ownership sectors is mono-tonic, indicating a consistent over-time trend toward more equal distribu-tion of men and women among three sectors. Among industries, most of the

increase in gender segregation occurred between 19901995, whereas therewas little change between 19821990. Occupational segregation has morethan doubled between 19821995, the most change among three measuresof labor force placement.

Figure 2 shows earnings differentials and the index of sex dissimilarity bysector, occupation, and industry across cities at different levels of market-ization. The index of marketization is a composite measure with mean 0 andstandard deviation 1. This index was constructed based on three city-levelvariables: proportion of nonstate employees; proportion of industrial output

generated by nonstate enterprises; and the proportion of foreign investment.The cities are divided into four categories based on their index of mark-eization.6 The left panel shows varied trends in earnings differentials7 bysector, occupation, and industry with marketization. With marketization,the amount of earnings differential by occupation and industry has steadilyincreased from a deviation of 1.5 and 1.3 times the average earnings to 1.8and 1.65, respectively, in the most marketized cities, while the earningsdifferential by sector has declined from 1.6 times the average earnings toonly 1.3 times in the most marketized cities. These figures show that with

marketization, earnings differentials among ownership sectors have declined,while differentials by occupation and industry have increased. Although thecorrelations between the three indices of earnings differentials and a con-tinuous measure of marketization are all moderately strong, only two ofthese three correlations are statistically significant: that of industry earningsdifferentials (0.42) and that of sector earnings differentials ( 0.30). Thecorrelation for occupation earnings differentials is modest (0.21).8

The right panel demonstrates that marketization is associated with anincrease in occupation and industry sex segregation, although only the one

between industry segregation and marketization (0.34) is statistically

5I suspect that the amount of sex segregation among industries is underestimated. In allfour years for which data are available, 5259 percent of males and 4250 percent of femaleswere in the manufacturing industry. We cannot estimate within-industry sex segregation forhalf of the urban labor force.

6Least marketized cities: zo 0.5 and N5 16; low marketization cities: 0.5 zo0.5 and N5 27; marketized cities: 0.5 zo1.5 and N57; and most marketized cities:z ! 1.5 and N5 5.

7Earnings differentials is a standardized measure of variability in wages using the stand-

ard deviation of wages (across sector, industry, or occupation) weighed by the average wagefor all the sector, industry, or occupation, respectively.8Because the 1995 CHIP data do not differentiate occupations in commerce, sales, and

service from industrial workers, close to 50 percent of the respondents were in the one singlecategory of worker. This large within-category heterogeneity, combined with the possibilitythat different jobs within this category are likely to have varying changing trajectories withmarket transition, might have contributed to this modest association.



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significant. With marketization, sector sex segregation initially declines sub-stantially, but remains unchanged with further marketization. In particular,the amount of sex segregation by industry has increased exponentially in themost marketized cities, showing the increasing significance of industry as a

Marketization

Earningsdifferentials

2.0

1.8

1.6

1.4

1.2

1.0MostMarketizedLowLeast

Sector

Occupation

Industry

Indexofsexdissimilarity

25.0

20.0

15.0

10.0

5.0

MarketizationMostMarketizedLowLeast

Sector

Occupation

Industry

d

d

FIGURE 2

Intercity Variation in Sex Dissimilarity and Earnings Differentiations byMarketization,a by Sector, Occupation, and Industry (Aggregated Data from

1995 CHIP, N555)

NOTE: This index was constructed based on three city-level variables: proportion ofnonstate employees, proportion of industrial output generated by nonstate enter-prises, and the proportion of foreign investment. The cities are divided into fourcategories based on their index of marketization: least marketized cities: zo0.5and N516; low marketization cities: 0.5 zo0.5 and N527; marketized cit-

ies: 0.5 zo1.5 and N57; and most marketized cities: z ! 1.5 and N55. Thesame three sector categories and 11 industry categories were used in CHIP 1995data. However, occupations are classified into five categories: owners and oper-ators of private businesses, professionals, cadres and managers, clerical workers,and skilled and unskilled workers. The correlations among earnings differentialsand gender segregation by sector, occupation, and industry are 0.30 n, 0.13, and0.20, respectively ( npo0.05, two-tailed test). The correlation matrix among theseseven variables (three measures of earnings differential, three measures of gen-der segregation, and city marketization) is available from the author on request.



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denominator of power in the marketplace. To make the distributionof the two sexes equal across industries and occupations, 13 percent ofwomen will need to change industry and 15 percent to change occupationin the least marketized cities. These numbers jumped to 20 percent and

22 percent in the most marketized cities for industry and occupations,respectively.

These two panels in Figure 2 show that earnings differentials by industry,occupation, and sector are correlated with gender segregation. The higherthe earnings differential among jobs, the higher the segregation among these

jobs. Compared with other cities, those that are most marketized are char-acterized by a high earnings differentiation by occupation and industry,and a low earnings differential by ownership sector. Gender segregationfollows the same pattern: the most marketized cities have the largest industry

and occupational gender segregation and the lowest gender segregation byownership sector. Statistical tests of data from 55 cities show that market-ization is associated with rising earnings differentiation by industry anddeclining earnings differentiation by sector. These tests also show that mar-ketization is associated with rising gender segregation among industries.This small sample of cities lends some support to Hypothesis 1(b) that themore marketized a city, the larger the amount of industry-based gendersegregation.

Both the over-time change illustrated in Figure 1 and the across-city

change in Figure 2 show the same pattern of change in sex segregation:gender segregation by ownership sector declines while gender segregation byindustry and occupation increases. Comparison across cities also shows thatsector- and industry-based earnings inequalities are also associated withmarketization: the more marketized the city, the larger the earnings ine-qualities among industries and the smaller the earnings inequalities amongsector, indicating a rising significance of industry as a basis of market powerand a declining importance of sector as a source of market strength.

New Logic of Economic Segmentation and Gender Segregation

Table 1 shows the change in earnings, change in sex composition, andchange in size for industry sectors in 19901995. Among the 10 industrysectors that have experienced the most relative declinesin earnings, six are inthe same three industries of construction, manufacturing, and commerce.These are industries deemed less essential and are subject to intense market

competition. Both state and nonstate enterprises in these industries aresubject to open-market competition. Industries in all three ownership sectorsare present in this group. Six of these 10 have an increase in women em-ployees, while three remain virtually unchanged in sex composition,including the two traditionally female-dominated fields of commerce and



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TABLE 1

Changes in Earnings and Sex Composition between 19901995, by Industry andSector (N530)

Industry and SectorChange in Average

Salary (Yuan)

Change in SexComposition(% Female)

Change in Size(1,000 Employed)

Transportation, collective 1,861 11.41 515.0Commerce, collective 1,883 0.61 1,121.0Manufacturing, collective 2,047 0.98 4,591.0Mining, collective 2,366 17.35 762.1Commerce, state 2,529 13.11 600.0Construction, collective 2,742 2.67 700.0

Education, culture, andmass media, collective 2,7581

1.76 60.0

Public health, sports, andsocial welfare, collective

2,934 10.89 99.0

Manufacturing, state 2,943 15.20 10,380.0Construction, new 3,056 13.74 193.3Mining, state 3,040 10.46 7340.0Public health, sports, and

social welfare, new3,238 116.10 3.6

Party and governmentagencies, collective

3,272 0.97 176.0

Education, culture, andmass media, state 3,32313.61 1,530.0

Party and governmentagencies, state

3,413 12.53 1,160.0

Public health, sports, andsocial welfare, state

3,746 11.98 560.0

Construction, state 3,853 1.08 300.0Commerce, new 3,939 17.70 684.2Manufacturing, new 4,038 4.13 5,587.2Real estate and social

services, state4,049 0.12 44.0

Scientific research and tech.development, state

4,424 0.33 190.0

Scientific research and tech.development, collective

4,613 5.92 1,010.0

Finance, banking, andinsurance, collective

4,601 13.55 148.0

Transportation andtelecommunication, state

4,809 13.22 710.0

Education, culture, andmass media, new

4,946 8.90 6.3

Real estate and social

services, collective

4,991 5.87 35.0

Finance, banking, andinsurance, state

5,395 17.49 580.0

Transportation andtelecommunication, new

6,220 12.73 80.4



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public health in the collective sector. Only one has a decline in the per-centage of women employees.

On the other hand, among the 10 industry sectors that have experienced thelargest increase in earnings, nine are in the four industries of real estate;finance, banking, and insurance; transportation and telecommunication; andscientific research and development. These industries capitalize on their rapidexpansion and enjoy large margins in economic returns. Because housing wasredistributed as a part of job benefits in the socialist redistributive economy, areal estate industry did not exist; workplaces and local housing bureaus took

full responsibility for construction and distribution of housing. The creationand rapid expansion of the real estate industry resulted in a rapid rise inearnings across this industry. Because banking plays a vital role in thestates control of the economy, it remained restricted to a state-monopo-lized operation and enjoys high profit margins. Although there are asubstantial number of state-sector industries in this group, industries in non-state sectors (particularly the new sector) are also present. Among these 10industry sectors that have experienced the greatest increase in relative earnings,five have an attrition of women employees, two remain unchanged in sex

composition, and the remaining three have slightly increased their percentageof women.

Figure 3 shows the relationship between sex compositions of industrysectors, change in average salary, and change in size of these industry sectorsduring 19901995. The left panel shows a generally negative associationbetween the percentage of females in an industry-sector and the amount ofchange in average salary. This finding further supports Hypothesis 2(a)that the less the growth of earnings in a job, the faster the female workersentry rates into these jobs. Industries in the collective and the state sectors

tend to cluster together with those in the same sectors. Except for threeoutliers (two industries in the state sector and one in the collective sector),industries in both the collective and the state sectors have experienced amodest decline in percentage female with increases in average salary. Incontrast to the small range of change in both the sex composition and the

TABLE 1continued

Industry and SectorChange in Average

Salary (Yuan)

Change in SexComposition(% Female)

Change in Size(1,000 Employed)

Scientific research and tech.development, new

6,253 10.90 27.0

Real estate and socialservices, new

7,427 2.50 334.8

Total 3,88611.17 188.1

SOURCE: Data are from China State Statistical Bureau (1998).



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average salary of industries in the state and collective sectors, industries inthe new sector have experienced changes of much larger magnitude (3,0006,000 yuan increase in the new sectors vs. o3,000 yuan for the collectivesector and o5,000 yuan for the state sector). More importantly, sex com-position in the new sector appears to decline more steeply with increasingearnings, indicating that industries in the new sector are the most responsiveto change in average earnings. Operating with little influence from the old

system and little state interference, industries in the new sector experiencedthe most change in their sex composition in response to earnings change.Labor flow into and out of the new sector generally operates under anopen-market system, which has been found to lead to increasinggender segregation in east European postsocialist countries (Rosenfeld andTrappe, 2002).

The right panel of Figure 3 shows that changes in industry-sector sizeare not associated with changes in their sex compositions. The growth in sizeof an industry sector is not associated with the change in sex composition,

inconsistent with Hypothesis 2(b) that fast-growing jobs are morelikely to experience feminization. This is not surprising, however, as priorevidence shows that China has a labor surplus as both mens and womensparticipation rates in paid work declined between 1990 and 1995 (Parishand Busse, 2000:22123). Firms in fast-growing industry sectors have not

Change in Average Salary 1990-95 (yuan)

80007000600050004000300020001000

Chang

ein%f

emale1990-95

20

10

0

10

Change in # Employed 1990-95 (thousand)

6000400020000200040006000

Chang

ein%f

emale1990-95

20

10

0

10

SectorNew

collect

state

New

collect

state

Sector

FIGURE 3

Change in Sex Composition, Change in Average Salary, and Change in Size in19901995, by Industry and Sector (N530)

SOURCE: Data are from China State Statistical Bureau (1998).



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exhausted the supply of male labor and thus are not forced to tap into thepool of female workers as they expand.

Feminization and Earnings: A Multi-Level Cross-Classified Model

Without city-specific industry- and sector-level data, I estimated a series ofmulti-level cross-classified models of log earnings to simultaneously es-timate the effect of change in sex composition and the effect of market-ization. In such a model, each individual is seen as cross-classified in anindustry sector and a city, similar to the way individual students are cross-classified by schools and neighborhoods (Raudenbush and Bryk, 2002). Thismodel has two components. The first is the within-cell or individualmodel:

Yijk pojkXP

1

ppjkXpijk eijk; 1

where Yijk is log earnings for individual iin cityjand industry sector k, p0jkis the intercept, ppjk is a vector of regression coefficients linking the logearnings with the predictors, and Xpijk is an individual-level predictor p forindividual i in city jand industry sector k. These individual-level predictors

are gender, education, seniority, Communist Party membership, a series ofdichotomous variables measuring occupations, and three measures of familystructure.

This micro component of individual earnings varies at the macro level.Individual earnings are also products of macro-level influencescharacter-istics of cities and industry sectors. These macro-level influences not onlyaffect individual earnings directly, but also interact with individual-levelvariables to exert cross-level interactive effects. These macro-level effects canbe expressed by the between-cell models, which estimate the effects of

industry sector and city-level predictors. There are four industry-sector pre-dictors: (1) Fk is female percentage in the industry sector k in 1990; (2) CFkis change in female percentage for industry sector kbetween 19901995; (3)Ek is the average earnings in industry sector k in 1990; and (4) CEk is thepercentage change in earnings for industry sector k between 19901995.There are two city-level predictors: (1) Mj is a composite measure of degreeof marketization for cityj; and (2) GDPj is GDP per capita for city j. Thereare two cross-industry sector and city interaction terms: CEk n Mj are cell-level effects of a particular combination of a city with industry sector,

measuring the combined effect of change in average earnings and degree ofmarketization, and change in female percentage and degree of marketization,respectively, for kindustry sector in cityj. There are two components in thisbetween-cell model. First, the intercept p0jk in Equation (1) is expressedas:



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p0jk y0 b0Fk l0CFk k0Ek n0CEk g0Mj d0GDPj

r0CEk Mj Z0CFk Mj d0jk;

2where y0 is the expected value ofp0jk when all explanatory variables are setto zero, b0, l0, k0, u0, g0, and d0 are the fixed effects of industry-sector-levelpredictors Fk,CFk, Ek, CEk, and city-level predictors Mj and GDPj, respec-tively, r0 and Z0 are the fixed effect of the interaction effect CEk n Mj andCFk n Mj, and d0jk is residual random effect of city-by-industry-sector cells.

Second, the regression coefficients in Equation (1) are expressed as:

ppjk yp gpMj dpjk; 3

where yp is the expected value of the regression coefficients ppjk when Mjis set to 0, gp is the effect of Mj on within-cell regression coefficients (i.e.,cross-level interaction effect between within-cell predictors and Mj), and dpjkis residual random effects on the within-cell regression coefficients of city-by-industry-sector cells.

TABLE 2

Net Effecta of Industry-Sector Variables on Log Earnings in 1995 (1995 CHIP,N510,878)

Model A Model B Model C

Industry-Sector Variables% female in 1990 0.010nnn 0.003

(0.003) (0.003)% increase in female 19901995 0.016nnn 0.019nnn

(0.004) (0.005) Average earnings in 1990 0.014n nn 0.013nn

(0.004) (0.004)% increase in earnings 19901995 0.036n 0.049n

(0.018) (0.020)Interaction Between Industry Sectorand City Characteristics

% increase in female 19901995 Marketization (most marketized51)

0.019n 0.019n

(0.009) (0.008)% increase in earnings 19901995

Marketization (most marketized51)0.024n

(0.012)0.013

(0.011)% of total variance explained 25.3 24.9 26.0

By cell-level variables 13.3 12.9 14.0By individual-level variables 12.0 12.0 12.0

a

Results are based on cross-classified multi-level models. These results are net of the effects ofindividual-level variables (gender, education, seniority, Communist Party membership,occupation, marital status, child younger than five, and grandchild younger than five) andcity-level variables (GDP per capita and marketization). Estimated coefficients for thesevariables are available from the author on request.nnnpo0.001; nnpo0.01; npo0.05 (two-tailed test).



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The combined model as represented by Equations (1), (2), and (3) asModel C in Table 2 was estimated using HLM 6.0. Models A and B arereduced forms of Model C: Model A contains average earnings, change inaverage earnings, and interaction between marketization and change in av-

erage earnings; Model B contains percentage of female workers, change inpercentage of female workers, and interaction between marketization andchange in percentage of female workers; Model C contains all these var-iables. Because the dependent variable is log earnings, the coefficients can beinterpreted as the percentage change in earnings.

Model A indicates that after controlling for a series of individual and citycharacteristics, average earnings in an industry sector affect individual earn-ings in three ways: workers in high-paying industry sectors enjoy higherearnings; workers in high-pay growth industry sectors enjoy higher earnings;

and workers in high-pay growth industry sectors in the most marketizedcities enjoy an additional increase in earnings. Individuals in industry sectorswith higher average earnings in 1990 have earnings that are 1.4 percenthigher for each yuan than the average industry salary in 1990. For each yuanincrease in industry salary between 19901995, those in this industry enjoy3.6 percent higher earnings than others with the same characteristics in otherindustries, and an additional 2.4 percent higher earnings if these high-paygrowth industry sectors are in the most marketized cities. These findingsclearly demonstrate that placement in the industry sectors has important

implications for individual worker earnings. Industry sectors that enjoy highrents or profits bestow higher earnings on their incumbents, and industrysectors that have risen in the hierarchy of economic segmentation rewardtheir incumbents with higher salaries. Marketization intensifies this process,as increases in individual earnings for those in high-pay growth industrysectors are much higher in the most marketized cities.

Model B estimates the effect of industry sex composition on individualearnings. This model shows that in industry sectors with a high percent offemale workers, individual workers earn less than their counterparts in in-

dustry sectors with a lower percentage of female workers. For each 1 percentincrease in the number of females in an industry sector in 1990, workerearnings are 1 percent lower than those of workers with the same charac-teristics in another industry sector. Furthermore, for each 1 percent increasein the percentage of females in an industry sector between 19901995,individual worker earnings in this industry sector are 1.6 percent lower; andthose in the most marketized cities experience an additional decrease of 1.9percent. Individuals in female-dominated industry sectors and those in fe-minizing industry sectors have lower earnings, which is consistent with

Hypothesis 3(a). Further, this negative effect of the feminization of industrysector on individual earnings intensifies in the most marketized cities as theearning penalty to those in feminizing industry sectors is more than twice ashigh in the most marketized cities than in other cities, supporting Hypoth-esis 3(b).



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Model C examines the effect of feminization on individual earnings aftercontrolling for the effect of industry earnings and all other industry-sector,city-level, and individual characteristics. Earnings for workers in feminizingindustry sectors are 1.9 percent lower for each 1 percent increase in female

workers, and this earnings penalty doubles (1.9 percent 1 1.9 percent) forworkers in feminizing industry sectors in the most marketized cities.This finding indicates that industry sectors that experienced a net increasein female entry also provide lower earnings to their workers, and this processintensifies in the most marketized cities, again consistent with Hypotheses3(a) and 3(b). Although average industry wages and over-time increasesin industry wages continue to be correlated with high individual earnings,sex composition of industries is not, and the positive return of affiliationwith high-pay growth industries does not increase in the most marketized

cities.

Summary and Conclusions

This article examined the impact of the Chinese market transition ongender-based segregation and earnings differentials, analyzing why and howpatterns of gender segregation change during marketization. I further ex-amined the effects of industry feminization and city marketization on in-

dividual earnings after controlling for individual, city, and other industry-sector characteristics. My findings can be summarized as follows.

First, this study is consistent with findings from industrialized marketeconomies that the more differentiated the economic segments, the higherthe degree of gender segregation among them (Padavic and Reskin, 2002).In the Chinese labor market, gender segregation is more prevalent amongindustries and occupations between which pay differentials are high, whilegender segregation is lower among ownership sectors that are becoming lessdifferentiated in wages. Between 19901995, marketization of state enter-

prises led to a decline in earnings differential by ownership sector, resultingin declining gender segregation by ownership sector. Conversely, as indus-tries and occupations have become more important indicators of marketstrength and position, differentials in their average salaries have increasedsteadily. Following this new form of economic segmentation, industry- andoccupation-based gender segregation increased between 1990 and 1995.

Second, gender segregation follows the logic of economic segmentation, adynamic that manifests in two ways. One is an over-time change: from 19781995, female workers made constant inroads into the state sector as it became

less desirable; from 19901995, female workers were squeezed out of industrysectors with high earnings growth. The other change is across-city differen-tiation: gender segregation by industry increased with marketization.

Third, feminization of jobs is associated with lower earnings. Individualsin the industry sector that have high rates of female entry are penalized in



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earnings. A series of multi-level cross-classified models indicates that with anincrease in the percentage of female workers employed in a industry sector,earnings decline. This decline persists after controlling for a series of in-dividual characteristics that bear on individual productivity, city-level var-

iables measuring level of economic development and degree ofmarketization, and industry-sector-level characteristics of average earningsand earnings change from 19901995.

Last, marketization exacerbates the pay penalty for those employed inindustry sectors that are becoming feminized. The negative effect of anincreased percentage of female workers in an industry sector is twice as highin the most marketized cities as in those less marketized. This finding showsthat the over-time trend in earnings decline for industry sectors that arefeminizing exacerbates in the most marketized cities, indicating that market

transition is driving this change.Similar changes in gender segregation have also emerged in postsocialist

European countries. Their service sectors have been growing and haveproportionally taken more women workers. As a result, the occupationalstructure in these former socialist countries has become more gender seg-regated (Van der Lippe and Fodor, 1998; Rosenfeld and Trappe, 2002). Myfindings indicate that the Chinese labor force is also experiencing a trans-formation in its pattern of gender segregation, shifting from ownership-sector-based segregation to industry-occupation-based segregation, becom-

ing similar to that of capitalist economies. Women workers are now chan-neled into less lucrative jobs, some of which are in the state sector, when thedynamics of the market reform redefine the logic of market segmentationand thus the ranking of jobs. This same pattern has also been found inRussia, where market transition has funneled women away from high-paying

jobs in private firms, from high-wage industries, and upward mobility, andtoward jobs that are low in wages and upward mobility (Gerber and May-orova, forthcoming).

These results lend strong support to the queuing perspective

that a decline in jobs relative wages leads to feminization as less attractive jobs go to women because employers prefer men and place them in jobsthat pay well (Reskin and Roos, 1990; Reskin, 1993). Such a perspectiveposits employer placement discrimination against women as the logic oflabor queuing. When the relative attractiveness of a job rises, more peopleboth men and womenbecome interested in this job. It is the employerspreference for men that leads to change in the sex composition of jobswhen they become more attractive. Because I found that sex composition ofindustries in the new sector in China is the most elastic with earnings

change, it can be derived that discriminatory acts are more prevalent in thisemergent sector than in other sectors. As the Chinese market transitionprogresses and the share of the new sector continues to grow, acts of genderdiscrimination are likely to lead to enlarged gender inequalities in the labormarket.



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Although these results do not lend direct support to the devaluationperspective that earlier levels of job sex composition affect later wages, theyshow the correlation between feminization and earnings. The devaluationperspective argues that the causal relationship between sex composition and

wages in the United States was set at the birth point of occupations, and thatthis correlation is frozen for the rest of the occupations lives, not subject tolater dynamics (England et al., 2004). My data from China provide aglimpse into the birth of such a relationship between job feminization andwages. During the early stages of the Chinese market transformation, asfirms in the new sector come into being, and jobs in the new sector arecreated, the wage-setting mechanisms are still flexible enough to adjust theirwage levels based on a multitude of factors, one of which is the cultureevaluation of mens and womens work. The making of the Chinese market

economy gives birth to a new set of institutional arrangements, including therelationship between job feminization and wages. The consequences of thistransformation are far reaching, leaving on jobs birth marks that areunlikely to disappear for a long time.

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