Feeling Good about the Iron Rice Bowl: Economic Sectors and Happiness in Post-Reform Urban China

Situated in China’s market transition, this study examines the relationship between economic sectors and individuals’ happiness in post-reform urban China. Based on pooled data analysis of restricted urban samples from the China General Social Survey (CGSS) 2003, 2006 and 2008, the subjective premium enjoyed by workers in the state sector is noteworthy: individuals working in the state sector have significantly higher levels of happiness than their counterparts in the private sector, other things being equal. After considering selectivity in mobility into the private sector, differences between those remaining in the state sector and those moving from the state to the private sector are highlighted: those remaining in the state sector are significantly happier than former state sector workers who moved into the private sector, whether the move was voluntary or involuntary. Possible underlying causes of these psychological costs are further explored: Institutional segmentation in the allocation of social welfare benefits rather than psychological factors serves as the primary nexus linking state-to-private mobility and happiness. On the one hand, those who moved voluntarily experienced a trade-off in enjoying higher paid-offs while losing a sense of security. On the other hand, involuntary, downward mobility leaves long-term psychological scars to those who experienced layoff or unemployment after controlling for social welfare benefits. People who experienced sectoral mobility, whether voluntary or involuntary, suffer from loss of the iron rice bowl. Results from robustness checks indicate that neither observed nor unobserved confounding factors, if any, would bias our conclusions. This study emphasizes the role of social security as an important dimension in determining individuals’ happiness that should be explored in future research.