Hukou System: China
The Hukou system was created in cities in the PRC in 1951 and expanded to rural areas by 1955. It was became a permanent system in 1958. Although there were many changes beginning in the early 1980s, the system remains unchanged currently.The Hukou System is a household registration system implemented in China. Registration is required by law under the People's Republic of China. The information collected consists of the name, parents, spouse, and date of birth of the individual. This system may also refer to the family register issued to each family that keeps track of the births, deaths, marriages, divorces, and moves of all family members.
Under the command economy instituted by the Communist Party, the Chinese government used the information collected by the Hukou system to classify individuals as either "rural" or "urban" workers. This serves to regulate the labor supply within the country, primarily by preventing migrant workers from moving to urban areas to seek employment. An individual classified as "rural" seeking a job in an urban area would encounter tedious bureaucratic paperwork, and constraining quota systems in order to obtain a permit to work . A "rural" worker working in an "urban" sector would not qualify for grain rations, employer-provided housing, and healthcare .
The Hukou system dates back at least 2,000 years, when the Han dynasty used it as a way to collect taxes and determine who served in the army. Mao Zedong's Communist regime revived it in 1958 to keep poor rural farmers from flooding into the cities. It remains a key tool for keeping track of people and monitoring those the government considers "troublemakers."
“Should China should abolish its Hukou system?” Yes. There are many problems with everyone migrating to one dominate area, leaving the rural areas less populated, hence an imbalance in the population. As many people see a fit to a new life, but they still needed the permission of the Chinese government, which is extremely difficult to attain if you want to move to the rural areas. Reasons such as shortages and lowered cost for factories do not justify the need for the continued existence of the Hukou system. With the Hukou system abolished, we can see a more civilized economy of China with more opportunities for both the “rural” and “urban” class citizens.
Rationale behind the Hukou system: Implemented in 1958 , the main rationale behind this system is to limit the migration to urban areas as it is problematic when a huge population migrates to one dominate area, leaving the rural areas less populated, and thus causing an imbalance in the population. The system was implemented for reasons such as shortages and to lower cost mainly for the factories. In later years, it would serve to collect and manage the information of citizens, which in turn is useful in monitoring them.
Inadequacy of the Hukou system: The system itself does not serve its purpose well at all. It was originally used as to keep track of every resident as a way of maintaining control over the population. The system worked well under the emperors and Mao because most people spent their entire lives living in one place. However, these days the system is outdated and inadequate in dealing with the all the people moving about in search of jobs and opportunities. It serves more as an unnecessary hindrance for the people of China. Moreover, with the increase in mobility of the population now, people from rural areas are free to move around. However, just because they lack an "Urban Hukou," they are forever designated as "temporary residents" and suffer all the social injustices such as denying them of public goods such as subsidized public housing, public education beyond elementary school, public medical insurance and government welfare payments. 
Welfare Issues: Public welfare suffers due to the restriction of labor; people who move out of their designated Hukou zones have no access to the education, healthcare or pensions available in the other areas. In order to get education for their children outside their designated Hukou, parents have had to fork out sums of money as much as $6000 Yuan in which they can scarcely afford. Local children do not get to mix with children with different Hukou living in their area as well, leading to misunderstanding and social tension. This Hukou system has resulted in massive social tension between the rich urban dwellers and the poorer rural villages as well. This occurs as the villages look on as their counterparts in the city get wealthier at their expense. All these social aspects are just some reasons why China should indeed abolish its Hukou system. 
Social inequality: Since the 1990s, income inequality in China has been rising rapidly between different regions and different social groups, with the Gini coefficient hitting 35.5, and reached 44.7 in 2001. Before 1980s, the rural workers are not allowed to work in the cities. After the reform in 1984, the rural workers are allowed to migrate but at a very costly price. Also, rural workers can get a job in urban areas, but they still do not have a urban Hukou. Despite this, they are permitted to work in cities with the temporary residential permit, but they cannot take up all the job vacancies. The occupational composition of migrants and non-migrants is rather different. Unlike urban residents, who are primarily employed in manufacturing and other industries, rural migrants are concentrated in service and construction industries. Migrant workers are perceived as cheap labor and are paid a very low wage, averaging 300–600 Yuan indicating that the same jobs are given different wages. The migrant worker’s average wage is 28.9% lower than the average level of urban workers and 15.96% of this difference is caused by wage discrimination differentials in the same sector. From all of the evidence above, we can see that the income inequality is largely caused by the labor market segmentation resulting from the Hukou system 
Economic Inefficiencies: China should abolish the Hukou system due to its various economic inefficiencies and social justices. While China should retain certain control over population mobility, there needs to be a fundamental reform of the system. This should include an end to Hukou dualism (agricultural/non-agricultural), a lessening of the distinction between local and non-local Hukou entitlements and the introduction of a more transparent, liberal and accountable process for inward Hukou transfers. Furthermore, the Hukou system in its present state is merely a hindrance to China’s progress and not a necessary evil that many have claimed. Also, it is important to note that one should not advocate the sudden abolishing of Hukou, but rather a gradual reform that will ultimately remove the Hukou system. 
Need for Gradual Change: There is a danger of a collapse in the entire welfare system if the Hukou system is totally abolished. Due to tight budget constraints, the government is unable to provide the entire population with the current benefits of those with “urban” Hukou's. Thus, there is a need for a gradual change in the system, to allow time for resource reallocation as well as prevent dissent from the people that are currently enjoying the benefits. However, we advocate that reforms should start now, with the end point ultimately the total abolishment of the Hukou system. Moreover, instead of relying on the Hukou system with all its intrinsic flaws to curb government expenditure, China should look into alternatives like improving the efficiencies of SOEs, or develop a more cost efficient social security network. Hukou system, with its flaws, will only be beneficial in short run. Meanwhile it’s potential social costs may be detrimental in the long run. Hence, for long run sustainability, it is important for China to allocate resources efficiently and solve the social issues using other methods 
- ↑ http://csde.washington.edu/downloads/98-13.pdf
- ↑ "Chinese apartheid: Migrant labourers, numbering in hundreds of millions, who have been ejected from state concerns and co-operatives since the 1980s as China instituted "socialist capitalism", have to have six passes before they are allowed to work in provinces other than their own. In many cities, private schools for migrant labourers are routinely closed down to discourage migration." "From politics to health policies: why they're in trouble", The Star, February 6, 2007
- ↑ David Pines, Efraim Sadka, Itzhak Zilcha, Topics in Public Economics: Theoretical and Applied Analysis, Cambridge University Press, 1998, p. 334.
- ↑ http://www.cecc.gov/pages/news/hukou.php
- ↑ Dennis Tao Yang, Urban-Biased Policies and Rising Income Inequality in China.
- ↑ John Whalley and Shunming Zhang, Inequality in China and Labour Mobility Restrictions (HUKOU)
- ↑ BBC – Chengdu to slowly remove Hukou system.
- ↑ BBC – Plight of “temporary residents” in Beijing China
- ↑ Kam Wing Chan, Hukou system in China.
Richburg, Keith B. "China 'hukou' System Deemed Outdated as Way of Controlling Access to Services." Washington Post. The Washington Post, 15 Aug. 2010. Web. 24 Apr. 2012. <http://www.washingtonpost.com/wp-dyn/content/article/2010/08/14/AR2010081402009.html>.