In China the employment of rural migrants is tightly controlled by governme
nt, with regard both to numbers and to jobs: urban residents receive prefer
ence and are protected against competition from migrants. A survey of enter
prises employing both urban residents and rural migrants in four cities is
analysed, using enterprise-level earnings comparisons, employment functions
and production functions. We find both 'job discrimination' and 'wage disc
rimination' against migrants. The two groups are highly imperfect substitut
es or, in a sense, complementary: migrants do the jobs that non-migrants wi
ll not or cannot do. The marginal product of migrants exceeds their wage wh
ereas that of non-migrants is below their wage. Although many enterprises h
ave surplus urban workers, they find it beneficial to hire migrant workers
as well and are constrained in their employment of migrants.