This paper tests if there exists a subjective well-being gap between informal workers in the informal and formal sectors in urban China, and explores the mechanisms behind such differences.
The author develops a simple theoretical model to analyze the effects of the employment sector and work time flexibility on workers' happiness and conducts a descriptive study to examine the relationship between employment type and subjective well-being using the China General Social Survey (CGSS) 2010, 2013, 2015 and 2017 datasets, a nationally representative sample.
The results show that only dependent informal work in the formal sector impairs workers' happiness, while the effect of independent informal work is not statistically significant. The potential mechanisms suggest that independent informal workers have higher working time flexibility and can work more hours to increase their earnings, which increases their subjective well-being. However, it is difficult for dependent informal workers to earn more by working more hours due to poor working time flexibility.
This study indicates that informal workers in the formal sector have lower subjective well-being in urban China and deserve more attention from policymakers. The author also suggests that increasing working time flexibility and encouraging self-employment can contribute to the welfare of informal workers.
