Workers' Wasteland

For many the gap is being filled by petty crime, prostitution and menial labor that can barely be called real employment. A 32-year-old former glassworker in Lanzhou in Gansu province, Li Yuxing made ends meet for a time by picking pockets at the train station. He swears he's given it up, but he can't find honest employment. Li has been relegated to China's army of street hawkers and shoe shiners, people who live day-to-day doing subsistence jobs that make up an informal subeconomy—untaxed and unrecorded.

Some local governments are encouraging this kind of job formation, absent any viable alternatives. Recently, Tieling, a small city nestled among cornfields in central Liaoning where most state factories have closed in the past five years, gave workers a onetime severance payout but stopped all other benefits. Instead, it issued licenses to the laid-off allowing them to pedal tricycle-like rickshaws around town. Everywhere today these pedicabs clog the streets; competition is so fierce that even the best drivers earn just $2 in a 10-hour day. It's enough for ex-factory workers to survive, but not much more. Yet Li Dianjun, a corn farmer from a nearby village, considers it a windfall. Li spent the past two months sneaking a pedicab into the city and, for the first time, competing with city dwellers for customers. He carefully avoids policemen who might confiscate his vehicle. "Of course I'll keep going back," he says. "If I couldn't work in the city, my family would go under."

Circumstance turns farmers into reluctant entrepreneurs. Genuine entrepreneurship, however, goes begging. Although small businesses can play a crucial role in generating jobs, there are no programs nurturing small business formation. Three-quarters of all bank loans go to state enterprises, starving private businesses of cash. Yang Qingtao knows well how difficult it is to get seed money. He runs a successful beauty parlor in Shenyang in Liaoning, and wanted to open a shop selling cell phones. After many dinners and many beers Yang finally convinced a bank official to lend him money—to buy an apartment. He put it into his enterprise instead. "It's almost like the banks don't want us to do business," he says from behind the Nokia counter of his new shop. Today Yang employs 10 young clerks, most of whom devote part of their salaries to helping laid-off relatives.

The lack of options forces some of China's jobless to take desperate risks. In 1999, Zhang Xu was laid off from a plastics factory in western Lanzhou, China's most polluted city. His wife lost her job this April. Zhang now heads every morning to the place where he's pinned his hopes: the stock exchange. On Labor Day, the most auspicious date he could think of, he plunged his entire savings of $5,000 into China's notoriously fickle market. Late in the morning he arrives at the Lanzhou trading center, watches prices blink across the large screen and searches for tips among the hundreds of unemployed workers who have also bet everything on stocks. Zhang has lost 10% of his money to the market's slide this year. But he's convinced the government will intervene and prop up ailing stocks. "So many of us put our money here, the government knows what the consequences would be if we lose everything," he says. "It can't let the market slip farther."

That thinly veiled threat of "consequences" is beginning to reverberate. This March, in the northeastern city of Liaoyang in Liaoning, angry workers protested outside the city hall for back wages and pensions in demonstrations that began at a handful of factories and quickly drew workers from all over the city. At the same time, 30,000 workers from China's biggest oil company, PetroChina, besieged their factory in the northeastern province of Heilongjiang to demand more severance pay even though they had received more than $10,000 each—a fortune by the standards of most unemployed. Encouraged, thousands of workers in other cities such as Fushun in Liaoning and Lanzhou also launched protests against layoffs. That it all took place during the annual meeting of China's rubber-stamp parliament showed workers wanted to send a message that carried farther than their local leaders.

Beijing will not tolerate an organized labor movement, however. While the government generally pays off protesters who are genuinely owed money, it also arrests those who lead demonstrations. At least 41 labor activists are being detained in China and another 60 were briefly held during the past three months, according to the International Confederation of Free Trade Unions. The carrot-and-stick strategy—placate the workers, jail the organizers—seems to work for now as a deterrent. Demonstrations continue to flare up, but they have yet to turn ugly enough for authorities to resort to mass arrests or head bashing.

Meanwhile, millions of additional layoffs are looming in the next few years. If China's economy continues to outperform, then the country just might be able to accommodate wrenching social changes without a political crisis and without bloodshed. But the outlook for the ordinary worker is not bright. The best most can hope for is that they will be as lucky as Wang Shanbao, who lost his job at a diesel refinery in Zhengzhou four years ago. In silent protest, the 55-year-old began sketching chalk drawings of Chairman Mao on the sidewalk outside his factory. Crowds gathered every day to admire his work. "The managers became so embarrassed that they gave me my job back," says Wang. Score a rare victory for China's unemployed millions.

—With reporting by Allen Cheng/Changchun and Jiang Xueqin/Shenyang

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