RURAL-URBAN MIGRATION IN CHINA AND INDONESIA: PATTERNS, CONSEQUENCES, AND POLICY INTERVENTIONS Aims and Background Economic growth almost inevitably leads to substantial movement of labour from the rural agricultural sector to secondary and tertiary industries

Aims and Background Economic growth almost inevitably leads to substantial movement of labour from the rural agricultural sector to secondary and tertiary industries in cities. This movement is thought to benefit both those who migrate and those who remain behind. As a result, rural-urban migration is often regarded as one of the most effective ways to reduce rural poverty and alleviate income inequality. Over the course of the next two decades, China and Indonesia are expected to transform from largely rural-based to urban-based societies. For both countries, it is estimated that approximately two thirds of the rural labour force will migrate to urban areas. Compared to most developed countries where similar population movements occurred at the height of the Industrial Revolution, China and Indonesia are expected to witness the phenomenon on a much larger scale and within a much shorter period of time. The underlying driving force for this is the fact that the current economic growth rates of China and Indonesia are about twice as high as those of the US and Europe during the Industrial Revolution. The unprecedented scale and pace of the migration movements are likely to confront both governments with extremely challenging policy questions, particularly in terms of taking urgent measures to properly manage the process of migration. While both China and Indonesia face similar challenges, the policies implemented and the consequences resulting from these policies are very different. China, for its part, has established a guest worker system with tight controls on the migration process, preventing overly fast migration as well as forcing migrants to keep ties with their home villages. One positive outcome of this system is that there are few slums of migrant workers in cities, despite the fact that more than 100 million rural migrants are currently employed in urban areas throughout China. However, this system has also led to large income gaps between migrant workers and urban residents, partly due to constraints on the types of jobs to which migrants have access (Meng and Zhang, 2001). Moreover, agricultural productivity has changed very little. Restrictions on land sale and limitations to access urban facilities prevented migrants from severing their ties with their rural land, and in turn severely hindered major progress in rationalization of the agriculture sector in most parts of the country. As a result, the income gaps between rural and urban areas have increased significantly over the last 20 years, …