Addressing the Income Inequality in the People’s Republic of China

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Table of Contents

Introduction
Sociology of Work: Income Inequality
Inequality in China: A Case Study
Conclusion and Recommendations
References

Introduction

The paper presents the case of China income inequality (II). The fast economic growth of the country has resulted in a very high Gini coefficient due to the discriminatory policies of the government. Nowadays, China works to reduce the geographical disparities as well as those between rural and urban populations, which presupposes rectifying the damage done by the previous governmental policies. Still, the government appears to neglect one of the reasons for II: social disparities (in particular, in the terms of education opportunities). It is suggested, therefore, that more attention is paid to this issue.

Sociology of Work: Income Inequality

According to Strangleman (2015: 29), the sociology of work is concerned with regarding and understanding “the nature of the social structures that enable and constrain work practices and cultures in their different forms.” In other words, it considers the complex phenomena that are incorporated in the process of work within social context on both macro and micro levels, in the static and dynamic status, separately and in their combinations (Strangleman 2015:29). It is obvious that the field of scholarship is extremely vast and covers numerous topics, one of which is the II issue.

II means the differences between the wages paid to different groups of people. II is often regarded together with wealth inequality (WI), and the two phenomena are related indeed. The term “wealth” is used to define the accumulated property; “income” presupposes a regular influx of money, be it wages, salary, investment interest and so on (Janoski 2013:427). II is always lower than WI since higher income allows accumulating wealth faster and easier (Janoski 2013:429).

Extreme II and WI are harmful to the society (Janoski 2013; the World Bank 2015; Oxfam 2015; the Institute for Policy Studies 2015). Their primary consequence is the decreased social solidarity, which leads to political dissatisfaction and crimes (including homicide). Naturally, II also means that the low-income part of the society possesses fewer opportunities (for example, education and healthcare), which leads to issues like increased teenage pregnancies occurrence, higher crime rates, shorter lifespan, and so on (Janoski 2013:430). As a result, II and WI are being measured and monitored nowadays, and attempts at decreasing them are being made.

The One Percent

In 2006, the World Institute for Development Economics Research published the data that described the state of the economy of the world in the year 2000. According to this information, one percent of the world’s adult population possessed 39.9% of the world’s wealth, which was about 3.4 times more than the possessions of the poorest 95% (Institute for Policy Studies 2015). Since then the situation has changed in figures but not in the essence. In 2014, the same number of people (1%) possessed almost half of the world’s wealth with 80% of the world’s population controlling no more than 5.5% (Oxfam 2015:2). The wealth of the world’s 80 richest people achieved the same amount as that owned by the least affluent 50% of the world’s population (Oxfam 2015:3).

As the research of the Institute for Policy Studies (2015) demonstrates, the approaches to defining the wealth and the wealthiest population varies among the reporters (for example, Boston Consulting Group or Forbes), but their conclusion is the same: the one richest percent of the world’s population proceeds to possess incredible amounts of resources, which results in extreme WI around the world. As a consequence, WI and II are the global problems that require solutions.

It should be pointed out that a slight decrease in the worldwide inequality was noted in 2014 (Institute for Policy Studies 2015). It was attributed to the changes in the II of India and China, and even though the Institute for Policy Studies (2015) suggests that the results can be overestimated, the significance of the improvements in these countries is notable. Therefore, the present case study is devoted to the development of the II situation in China.

Gini Coefficient

The most common and renowned method of measuring II is the Gini coefficient (named after a sociologist) that can be used to compare the level of II within various units (countries, states) with the help of a zero-to-one scale (Janoski 2013:428). The zero corresponds to the perfect income equality; the higher the value of Gini coefficient, the more an economy is deviating from it. The coefficient of above 0.5 should be interpreted as a severe level of II; that of 0.4 is expected to cause unrest (Roberts 2014). There are other indices like Hoover and Theil, but they are not similarly popular (Janoski 2013:428). In this case study, Gini coefficient will be used to define the development of II in China.

The World’s Actions

Since WI and II are global issues, various solutions are being offered by international and local organizations. The World Bank (2013) attempts to deal with the issues by targeting the least wealthy part of the world’s population: apart from having set the goal of eliminating extreme poverty by 2030, the Bank also introduces the Shared Prosperity agenda. The latter is aimed at the increase in the wealth of the poorest 40% of the world’s population. For that, the bank introduces an indicator that involves tracking the changes in the income of the poorest part of a country’s population. According to the bank, there are many ways to achieve the increase in the income of the poorest part of the world, and the path of every single country is going to be different to suit its needs and customs. Still, the basis for Shared Prosperity is the opportunity: the access to education, healthcare, nutrition, social protection and, naturally, workplaces (The World Bank 2013). Oxfam’s (2015) “Even It Up” Campaign is similar, but it is aimed at reducing extreme II, which includes the elimination of gender gap, improvement of taxing systems, adjustments of minimum wages and enhancements of the transparency of executive compensation, the development of free public services, improvement of social protection, and so on. It is obvious that the mentioned issues are among the most relevant reasons for II; eliminating them should lead to the improvement of II situation in the world.

These suggestions are going to be viewed from the point of view of their applicability to the case of China.

Inequality in China: A Case Study

The Development of the II Situation in China

Before the 1980s, China was a country that is described by Goh, Luo, and Zhu (2009:495) as a “poor egalitarian society.” Since 1990s China has been demonstrating extremely high rates of economic growth; for instance, its per capita growth has been increasing at the annual rate of 9% (Goh et al. 2009:485). Nowadays, there are more than a million millionaires in the country, and the total household wealth of China is the third largest in the world (Credit Suisse 2014:48). This result was pursued by the government and achieved through numerous reforms, many of which were aimed at restructuring the economy; among such measures is the development of State-Owned-Enterprises that sought to employ the skilled workforce along with the encouragement of the urbanization processes (Goh et al. 2009:486; Roberts 2014). It is not difficult to deduce that the policies encouraged disparity: the city population was favored over the rural one; the skilled workforce was favored over the less skilled groups. What is more, the most developed regions were also favored, which ensured their rapid growth but also deprived the less developed areas of the support they had needed more (Goh et al. 2009:495).

It must be pointed out that the economic growth of China has resulted in a significant reduction of poverty. It has been stated that the urban poverty is almost eliminated in the country with the help of governmental subsidy that raises the minimum wage; the pension that is being paid to rural population is not famed for similar results yet, but China intends to eliminate poverty in all its regions by 2020 (Stuart 2015). Still, according to Goh et al. (2009:495), the eradication of poverty did not only fail to reduce II but has actually contributed to it.

In the 1980s, China’s Gini coefficient was barely above 0.3, but it had been rapidly increasing together with the economic growth (Roberts 2014). The peak of Gini coefficient in China was in 2008 (0.491), but it then lowered to 0.473 in 2013 (Stuart 2015; the United Nations 2015). Im (2014:521) insists that the disadvantaged groups of China tend to consider II legitimized due to the authoritarianism of the country, but the unrest promised by such a high Gini coefficient did take place, for example, in the form of the April strike of the Nike workers as pointed out by Roberts (2014).

According to the United Nations’s (2015) Human Development Report, the latest data on Gini coefficient of China is 0.37, which demonstrates that the country intends to reduce its II and is making progress in this respect.

The Solutions: Implemented and Suggested

From the continuous decrease of Gini coefficient of China, it can be concluded that the country is moving in the right direction. First of all, it is obvious that, just like the World Bank (2015), China seeks to eliminate poverty and is being successful in this area. The fact that the urban and the rural population receive the aid from the government suggests that the previous policy of favoring various groups of the society is being reconsidered. Admittedly, the situation with urban poverty is better than that in the rural areas, but this may be the result of the scope of the problem rather than the adequacy of the measures. In other words, since the mentioned researchers have all pointed out the significant II between different regions, it can be suggested that the eradication of rural poverty will be naturally slower, and it is not the result of a flaw in the policy.

According to Goh et al. (2009:495), education has been a particularly important aspect that defined income distribution in China. At the same time, the authors insist that the access to education of the population of different areas (in particularly, well-developed cities as compared to rural regions) is not equal. The issue of education disparity is similarly pointed out by Im (2014:521) who had the access to more recent data. A similar conclusion is made by Gustafsson and Sai (2009:505-506) who explain that education is among the primary factors that allow Chinese people to reach the highest employment ranks. The authors also point out that II between high-ranked and middle-ranked employees is not drastic, but it was growing at the beginning of the century (Gustafsson and Sai 2009:505). In the terms of education disparity, Goh et al. (2009:495) propose a less discriminatory financing approach for the sector, which is a valid point.

To sum up, the II situation in China is being rectified with the help of eliminating poverty by changing the discriminatory policies of the previous years, which is a logical decision. Still, the social disparities (in particular, education issues) remain unattended, even though, as stated by Oxfam (2015:9) and the World Bank (2015), the decrease in social inequality leads to the elimination of II.

Conclusion and Recommendations

In the World Bank’s (2013) Shared Prosperity agenda it is pointed out that economic growth tends to come together with growing income inequality. Still, from the information presented above it is evident that the primary reasons for the II in China are the discriminatory policies of the government. It should be pointed out that the same policies had obviously been effective in ensuring the economic growth of the country, but nowadays the government is making the logical decision of changing them to rectify the II situation. China is not only acknowledging the necessity of reducing its II, but its government is also taking relevant measures that are generally in line with the poverty elimination agenda of the World Bank (2015). The country still has a relatively high Gini coefficient, but the situation is obviously changing.

The primary recommendation for the case study is to proceed with the agenda of limiting the disparities between rural and urban as well as well-developed and less well-developed regions. Apart from that, it is important that the government recognizes the inequality in opportunities for the people of China (in particular, those concerning education).

References

Credit Suisse. 2014. Global Wealth Report 2014. Zurich: Credit Suisse Research Institute. Web.

Goh, Chor-ching, Xubei Luo, and Nong Zhu. 2009. “Income Growth, Inequality and Poverty Reduction: A Case Study Of Eight Provinces In China”. China Economic Review 20(3):485-496.

Gustafsson, Björn, and Ding Sai. 2009. “Rank, Income And Income Inequality In Urban China”. China Economic Review 20(3):497-507.

Im, Dong-Kyun. 2014. “The Legitimation Of Inequality: Psychosocial Dispositions, Education, And Attitudes Toward Income Inequality In China”. Sociological Perspectives 57(4):506-525.

Institute for Policy Studies. 2015. “Global Inequality.” Web.

Janoski, Thomas. 2013. “Income Inequality.” Pp. 427-431 in Sociology of Work, edited by V. Smith. London, UK: SAGE Publications.

Oxfam. 2015. Wealth: Having It All and Wanting More. Oxford: Oxfam GB. Web.

Roberts, Dexter. 2014. “China’s Income-Inequality Gap Widens Beyond U.S. Levels”Bloomberg Business. Web.

Strangleman, Tim. 2015. “The Disciplinary Career of the Sociology of Work.” Pp. 17-31 in The SAGE Handbook of the Sociology of Work and Employment, edited by E. Edgell, H. Gottfried, and E. Granter. Los Angeles: SAGE.

Stuart, Elizabeth. 2015. “China has almost wiped out urban poverty. Now it must tackle inequality.”The Guardian. Web.

The World Bank. 2013. “Shared Prosperity: A New Goal for a Changing World.”Web.

United Nations. 2015. “Human Development Reports: China.”Web.

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