ORGANIZATIONAL UNCERTAINTY AND LABOR CONTRACTS IN CHINA ECONOMIC TRANSITION

Lifetime employment was a cornerstone of the Chinese socialist system constructed under Mao. In this system organizations served the functio n of social security and as a result, many organizations were overburd ened with bloated work forces and retirees that drew from organization al coffers well into old age. Labor contracts fundamentally alter this system, as they allow firms to end the socialist institution of lifet ime employment. Yet there is significant variation on the institutiona lization of labor contracts in organizations. Based on a sample of 81 films in industrial Shanghai, I show that organizations that are exper iencing uncertainty in the economic transition are more likely to inst itutionalize labor contracts on an organizationwide basis. There are t wo types of ol organisational uncertainty in the economic transition: economic uncertainty and administrative uncertainty In cases of econom ic uncertainty, firms that lost money in 1990 and firms that are burde ned by large forces of retired workers are more likely to place their workers on labor contracts. In the case of administrative uncertainty firms that are at the highest levels of the industrial hierarchy are a lso significantly more likely to place their workers on labor contract s. Although these upper level firms were the most protected under the command economy: these are being forced to handle the greatest among t he responsibilities in the economic transition and as a result, they e xperience the greatest sense of being set adrift by the state.