Post-industrial Economic Restructuring and Wage Inequality in Urban China, 2003-2015: A Sectoral Perspective

Income inequality in urban China has attracted growing attention from China’s urban researchers and policy makers. Whereas many studies have interrogated the pattern and process of the income gap in Chinese cities undergoing the institutional transformation from plan to market, relatively little is known about how such unequal distribution of income is related to China’s ongoing structural transformation toward a post-industrial economy. Drawing on a decomposition methodology based on the Theil index, this study aimed to address this lacuna through an empirical investigation of China’s urban wage inequality from a sectoral perspective. Our empirical study identified the low-wage manufacturing sector and the high-wage producer services sector as the two biggest contributors to urban wage inequality in China. Urban wage inequality within the producer services was found to be caused by the spatial concentration of a disproportionate number of high-paying jobs in a few developed, high-tier city-regions on the eastern coast. Our empirical findings have important implications for the formulation of policies to address the income inequality that plagues China’s continuing urbanization.

The role of intangible capital in wage inequality between skilled and unskilled workers in China

Wage inequality between skilled and unskilled workers has increased rapidly in China, right along with its major trading partner--the United States. Trade liberalization and technological improvement have been proposed as causes for the inequality, yet trade liberalization and technological improvement have set the stage for another, possibly more important, cause of the inequality： the movement of intangible capital to China. Intangible capital works synergistically with other inputs to make skilled-workers and tangible capital more valuable. Once the accumulated tangible capital reaches a certain level, its lower unit cost will attract the inflow of intangible capital, which will further expand the demand for skilled workers. As a result, wage inequality becomes larger in China. This paper takes the first step in an attempt to understand the role that the movement of intangible capital plays in the increasing wage inequality in China, and sets out several possible policy prescriptions for China to deal with this inequality.

Urban wage inequality:The reform of state-owned enterprises in China’s great transition

Along with the further reforms of state-owned enterprises(SOEs),urban China has experienced an evident increase in wage inequality.Using provincial-level data for the period 1993–2013 and individual-level data from five waves of the China Household Income Project from 1988 to 2013,this paper investigates how the SOE reform affects wage distribution in urban China by considering three mechanisms:wage determination,ownership structure and institutional segmentation.The results of this study show that overall inequality increased with the reduction of SOEs’share in the economy.Moreover,through a detailed Oaxaca–Blinder re-centred influence function decomposition,this experiment obtains consistent and robust results.Based on the theory of soft budget constraint,this study demonstrates that the increase in urban wage inequality has been mainly caused by wage structure effects.Since the SOE reform in the 1980s,the wage determination mechanism has changed with the increase in the return of the labour force to education.During this period,institutional segmentation was of less significance in explaining the wage gap between SOEs and non-SOEs.Furthermore,the accelerating ageing process of China’s population had no significant effects on the trajectory of urban wage inequality throughout this period.

Trade Liberalization and Wage Inequality： Evidence from the U.S. States

This paper examines the relationship between trade liberalization and wage inequality for 50 U.S. states during the period from 1999 to 2008. The Difference-in-Differences and fixed effects methods are employed to evaluate the effect of trade liberalization on wage inequality in the U.S. states. Empirical results reveal that trade liberalization and de-unionization do increase the wage inequality between skilled and unskilled workers. Evidence shows skill-biased technological change has no significant impact on rising wage inequality. As Difference-in-Differences estimation on time-series cross sectional data involves many years, the conventional standard errors often understate the standard deviation of the estimators. This paper employs the standard bootstrapping procedure and the clustering error procedure to correct the problem, and all sign patterns still hold.

Changes in Job Structure and Rising Wage Inequality in Urban China, 1995-2007

Abstract We use household surveys from 1995, 2002, and 2007 to examine how changes in job structure contributed to China＇s rising urban wage inequality, considering three job characteristics： occupation, industry, and firm ownership. The explanatory power of job structure for wage inequality increased between 1995 and 2007. Both the change in relative number of jobs （composition effect） and the change in between-job and within-job wage gaps （price effect） contributed to rising wage inequality. Price effect was the major contributor, whereas composition effect played a larger role in the 1995-2002 period than in the 2002-2007 period, and at the lower-half distribution. Between-job inequality played a major role in the first period, and within-job inequality played a major role in the second period. Our results suggest that both technological change and institutional features influence job structure and wage inequality.

International financial crisis and wage inequality in urban China

The shock of the 2007/2008 international financial crisis had a negative impact on the Chinese economy at its early stage,but the immediate reaction of the Chinese government with a stimulus package of 4 trillion yuan has recovered this economy soon.Since the crisis and the governmental stimulus package have generated different impacts on unemployment and wage growth across regions and industries,it will lead to some changes in the pattern of wage inequality.This paper uses urban household data collected from RUMiC surveys during 2008–2010 to investigate changes in wage growth and inequality in urban China in this period.The findings indicate that the international financial crisis did not have significantly negative impact on wage growth and contributed to narrowing wage inequality in urban China,which was largely due to offsetting effects of the governmental stimulus policies.However,as the impact of the stimulus policies faded and the impact of the international financial crisis worsened,the wage growth experienced a downward trend and wage inequality rose in 2010.

How Skill-Biased Technical Change Sustains China＇s Comparative Advantage

The sustaining trade surplus in China has arrested more and more attentions and concerns. The industrial structure upgrading and wage rise should have kept down the trend of comparative advantage and surplus growth, but unfortunately in vain. This paper presents a theoretical framework, which is explaining the reason from SBTC induced along by FDI. In the short run, taking some outsourcing linkage home will increase the skill demand, while in the long term, skill supply will increase since the wage rise will incentive the edge skill labour, and therefore, the skill premium increase will be suppressed, comparative advantage and trade surplus sustained.

Indonesia’s Cheap Wages Regime:The Political Economy of Minimum Wages Policy under Jokowi Presidency

Indonesia’s new wage policy mechanism made a new history since Joko Widodo(Jokowi)became President.The first minimum wages policy in Indonesia was implemented in 1969 in which the determination comes from society^monthly necessities through a discussion involving labor,employer,and state,it is known that the determination is no longer using aforementioned variables but it is rather based on a market-standard formula.This paper exploring the logic political-economic of wage policies implementation based on neoliberalism in the first presidency of Jokowi,which has implications for affirming cheap wages policies.This research uses a qualitative method by comparing two regions with different economic bases,namely Bekasi as the largest industrial area in Southeast Asia and Yog-yakarta as the province with the highest national economy inequality and the cheapest national minimum wage representation.The findings of this research show that this new wage formulation is emerged from the ideology of corporatism that takes place in every power transfer process and has the implication of reinforcing wage inequality that occurs in the local context in Indonesia.Politically,this regulation eliminates the democratic mechanism in the form of tripartite through a survey of monthly necessities which is carried out by labor,government and employer every year and has divided the strength of trade unions in fighting for the determination of decent wages.

Would a North-South Free Trade Agreement Hurt Unskilled Labor in the North？

I present a simple model to examine the impact of international outsourcing on the welfare of skilled and unskilled labor. In this model, specialized business services are to facilitate manufacturing production, creating additional welfare gains in the presence of positive production externalities. Policies that favor the business service sector contribute to the development of a larger bundle of specialized business services, generating more welfare gains to not only skilled but also unskilled labor. Thus, a country＇s unskilled labor is not necessarily worse off with open trade if the country is prosperous in business service provisions.