When Lu Xueyi talks about the abuse of migrant workers in the mainland's coastal boomtowns, he is not only expressing sympathy for this underprivileged class, but also regrets the effect this is having on the nation's economy.

The theory of a developing economy goes like this: as a country builds up its economy, the cost of manufacturing gets higher and operations are gradually moved to lower-cost destinations, for example, as they did from the US to Japan in the 60s and 70s, and later to South Korea and the other Asian tigers, and then to China's coastal regions.

From there, it is supposed to "trickle down" to China's hinterland.

But after 20-odd years of rapid economic growth, this has not happened. Why is this the case, Lu asks. The answer, he believes, is "because the cost of hiring workers in places like Shenzhen has been kept artificially low".

"Some factories have even been paying 300 yuan (US$36) in monthly wages for the past 20 years, and given the rate of inflation, it means actual wages have been decreasing steadily," Lu says, citing a government survey that reveals that the average wage for a migrant worker in Shenzhen is still 588 yuan (US$71) a month.

This, according to Lu, is a time bomb which, if not addressed properly, will explode.

Lu, one of the country's most eminent sociologists, has an acute understanding of farmers who have set out for the bright lights and big cities, as well as those who were left behind tilling land - he has spent a lifetime studying this chunk of Chinese society and constantly shares his insights with government policy-makers.

Why should government officials always side with the business owner when there is a labour dispute, he asks rhetorically.

"What's wrong with a two-day strike if migrant workers can secure from it, a little improvement in their working conditions or wages?"

He says that some officials have the same mentality that existed a decade ago.

"In the early 1990s, workers took to the streets to protest government-sanctioned shutdowns, but now it's private businesses that are the target (of their discontent). The government should be a fair arbiter and protect the rights of workers if possible.

"When a foreign journalist asked me recently about the shortage of migrant workers, I replied: 'What shortage? there is no shortage'.

"We have an additional 150 million surplus rural labourers. It's a few black-hearted employers who have caused this (situation).

"Even for such abysmal wages, they owe a whopping 100 billion yuan (US$12 billion) in back pay."

The mainland's 100-million-strong army of migrant workers are building China's highways and highrises, yet they rarely have a chance to become residents in the cities they are helping build with their sweat and blood.

That, according to Lu, is bad for the welfare of the whole country because it chokes off the natural process of growing a sizeable middle class, which is the backbone of any modern society.

Lu cites the 2000 census that showed that 57.5 per cent of manufacturing jobs were being done by migrant workers. However, poor treatment has prevented them from acquiring technical skills.

In countries like Japan and South Korea, 50 per cent of manufacturing workers have "medium-level technical skills" and about 30 per cent are categorized as having "advanced skills".

On the mainland, a technically-proficient worker is more difficult to come by than a graduate with a master's degree, says Lu.

An employer who pays pitifully low wages or owes back pay would never think of investing to upgrade his employees' job skills, he concludes.

However, the picture is not all doom and gloom, he says. The fact that 3 million migrants are living in cities like Beijing and Guangzhou without any major social unrest occuring is quite reassuring, he believes.

Lu looks forward to the day when the outdated residency (hukou) system for the mainland's major cities is abolished and long-term migrants are allowed to assimilate with the locals.

"That's a natural way to expand a middle class," he says.

The growth of China's middle class is becoming more significant. In 1999, the middle class accounted for 15 per cent of the working population. It has been growing by roughly one percentage point a year since then, which means that now, a fifth of the country can be categorized as middle class.

China's middle class has evolved late and on a smaller scale, says Lu. Japan, with a population of 120 million, has 100 million people that fall into the middle class. China needs to maintain its pace for at least another 20 years so that there will be a bulge in the middle stratum of the society.

To ensure this happens, China needs to reduce its farming population, which theoretically still stands at 90 per cent, if one uses the old methodology for determining people who fall into this category.

The actual figure is 42.7 per cent, and "it should go down to 30 per cent," says Lu.

"Compare this to the West, which has only 5-10 per cent (of its population) in farming."

A related issue is the gap in urban-rural wealth, which, at 2003, stood at a ratio of 3.23:1. Urbanites earned 8,472 yuan (US$1,024) a year while farmers pulled in only 2,622 yuan (US$317) a year per capita. When perks like social security benefits are factored in, the ratio is closer to 5:1 or 6:1, "which only happens in China and a few other countries", says Lu.

To put everything in perspective, Lu and his team spent many years studying the mainland's social groups.

After obtaining responses from 10,000 questionnaires and after 1,000 interviews, he concluded that there is a 10-level "class structure" that exists.

It has been hailed as a monumental work by many and criticized by others. About 60-70 per cent of respondents in a poll conducted by Sina.com generally agreed with the results.

According to Lu, China's 10 social groups, and their percentage of the population, are:

1. Senior government officials (2.1%)

2. Senior business executives (1.6%)

3. Private business owners (with eight or more employees) (1%)

4. Professionals (academic or technical, including teachers) (4.6%)

5. Clerical workers (including lower-level officials) (7.2%)

6. Private business owners (with seven or fewer employees) (7.1%)

7. Service industry workers (11.2%)

8. Industrial workers ("workers" in the traditional definition) (17.5%)

9. Farmers (42.7%)

10. Urban and rural unemployed or underemployed (4.8%)

Lu explains that these "10 classes or strata" have been arrived at using a method that is different from previous classifications, which were ideology-driven.

In Chinese, the division of "class" has always been a political division, or jie ji, whereas in Lu's classification, "class" is determined by demographics or jie ceng.

But the biggest difference lies in purpose. While in earlier times, classifying members of society in groups was done to highlight a "class struggle", the purpose of Lu's study of modern-day classes is to help co-ordinate measures to reduce the disparity between classes and develop harmony between them.

Unlike his Western counterparts, Lu based his classifications not on levels of income, but on the characteristics of each group and the resources at their disposal.

Specifically, he looked at three kinds of resources that an individual can command - organizational, economic and cultural. In layman's terms, the questions he posed were: "Do you have power?", "Do you have money?" and "Do you have status?"

Lu quips that the national labour union complained about the low ranking of "workers", whereas senior officials were uncomfortable at occupying first place.

The list depicts a pyramid-like structure, with the three classes at the bottom making up more than half the working population.

"In an ideal society, the hump should be in the middle," Lu says.

"We have large classes that should be small, and smaller ones that should be much bigger.

"It's not the ranking that's unreasonable, it's the proportion of the ranks," he adds.

The recent rise in farming income is having a noticeable impact.

"This year is the best year for farmers since 1997," he says, and notes that per capita income is expected to grow by 5 per cent.

"The policies formulated by President Hu Jintao and Premier Wen Jiabao are having a tangible effect on closing the urban-rural divide," he says.

"China is at the crossroads," Lu continues, quoting a recent statement by China's leaders.

"It can either smoothly evolve into a medium-level developed country or it can spiral into stagnation and chaos."

He jokes that "China hands" from the West are generally more bullish on China than China's own scholars.

"As for me, I'm cautiously optimistic," he says.

Lu is confident that China can keep its economy racing. It is the building of a "harmonious society" that concerns him.

The key, he says, is to "optimize the social structure", or "lift a large chunk of the rural poor into the middle class".

(HK Edition 10/28/2004 page18)