Institute for Research on Labor and Employment

In China, compulsory land acquisition is an activity dominated by the government transferring the land ownership from collective owned to state owned. The compensation for expropriated farmers is the core issue in this process. Different from those experiences of developed countries, the range of compensation in China is not determined on the basis of the market price of land since there is no market for land ownership trading. After land acquisition, the government gets high land grant fees from granting land-use rights to developers. Land grant fees functions as the market price of land. Compensation for expropriated farmers is only a small part of it. According to our estimation, the number of expropriated farmers is larger than 83 million. Expropriated farmers are exposed to the risk of future impoverishment with inadequate compensation and they may even turn into members of the most vulnerable group. Therefore, there are a lot of concerns about them. In this paper, we advance four arguments. First, it is very difficult for expropriated farmers to fulfill the transformation from farmers to real urban citizens under insufficient compensation, even though they live in storied buildings and do not work on their land. The current compensation standards should be improved according to the potential value of the land in order to make them wealthy, because income generation is the key factor in their integration into urban civil society.

Second, the goal of compensation is to rebuild a basis for the farmer to pursue a sustainable livelihood and the compensation should cover the total social costs of resettlement. A lump sum payment cannot inherently solve the sustainable livelihood problem because it is only wealth stock not the income flow. To support their long-term livelihoods, added forms of assistance for their future income flows are necessary. Third, ways for expropriated farmers to get income flows include: integrating them into the social security system, holding stable non-agriculture jobs, and possessing more apartments. If future compensation and settlement covers both their loss of wealth stock and facilitates their income growth, both their short-term and long-term lives can be guaranteed in theory. Finally, special help is needed to assist them in planning their use of compensation fees on their long-term livelihoods.