Compensating Wage & Income Differentials for Occupational Risk: Evidence from Migrant Workers in China's Pearl River Delta

This study contributes to an important, but under-researched, topic on China by empirically examining the theory of compensating differentials in the context of China's migrant workers. Using survey data collected from the Pearl River Delta in Guangdong province in south China, this study applies the Firpo-Fortin-Lemieux quantile decomposition method to examine the compensating wage and income differentials for migrant workers undertaking risky and safe jobs. The results show that migrant workers undertaking risky jobs incur a wage penalty at medium- and low-wage levels and an income penalty at the low-income level. In contrast, migrant workers at the high wage level enjoy positive wage premiums, and those at the medium and high-income levels enjoy positive income premiums. Both the negative wage premiums and positive income premiums exhibit an inverted U-shape with the quantile increment. Overtime allowances, bonuses and other income are the major sources of compensation for job riskiness. In addition, at the medium-income level, workers in risky jobs are further compensated by employee benefits, while at the high-income level they are further compensated by medical reimbursement.