Market Transition and Changing Organizational Role in Social Inequality in Urban China

This paper investigates the changing role of organizations in social inequality in urban China since dramatic organizational reforms and institutional transformations in the mid-1990s. It draws theoretical insights from the “institutional embeddedness” perspective. As organizations are embedded in the institutional environment, their role in social stratification process can change dramatically as the state overhauls institutions and restructures organizations during China’s market transition. The specific role of organizations in multidimensional social stratification is also contingent on concrete institutional arrangements and market conditions in each domain. Therefore, I conduct a substantive institutional analysis of specific state reforms and emerging market conditions in urban China to reveal the changing organizational roles in social inequality.

The old stratification order under the socialist command economy was shaped by organizational segmentation based on economic sectors and organizational ownership. As organizations in the state sector, including state-owned enterprises (SOEs), government agencies, and public organizations, had access to more resources, they provided better socioeconomic benefits in all aspects for their employees. Since the mid-1990s, the powerful Chinese state overhauled the redistributive system and restructured organizations, which broken down organizational segmentation and reshuffled the stratification order. Meanwhile, the state has taken various approaches to develop markets in different domains in accordance with its socioeconomic and political agenda. In this complex institutional and market environment, we need to scrutinize specific state policies and institutional arrangements to appreciate distinct organizational roles in multiple dimensions of social inequality, such as job employment, income, housing, and social welfare benefits.

To test my theoretical argument, I draw empirical evidence from two national survey data collected ten years apart (1994 and 2003) from urban China. These two data sets collected right before and after radical state reforms in the mid-1990s provide excellent opportunities to investigate the changing role of organizations in social stratification processes along the market transition. Statistical results show that employees of SOEs are more likely to lose jobs. Organizational types have little impact on income disparity. Employees of SOEs fare the worst in housing conditions after housing reform. In contrast, SOEs as well as government agencies and public organizations in the state sector continue to provide better social welfare benefits.

These findings indicate the changing roles of organizations in social stratification amid profound institutional transformations in urban China. After dramatic organizational reforms and in the heterogeneous market conditions emerged since the mid-1990s, organizations continue to play important yet distinct roles in various aspects of social inequality. Although situated in China’s market transition, this study has theoretical significance and broad implications. It shows that we need to scrutinize state reforms and policy changes, concrete institutional and market conditions, and organizational reforms to appreciate the key organizational role in social inequality.