Western countries tend to view income inequality in terms of a disparity in individuals’ earnings. According to Tak Wing Chan, Chinese income inequality is better conceptualized as a disparity in people’s earnings at different points in their lifetime.
In a new study entitled “The Dynamics of Income Inequality: The Case of China in a Comparative Perspective,” Chan, a professor of quantitative social science at University College London, and his colleagues John Ermisch and Rob Gruijters examined longitudinal earnings of individuals of prime working age (between 31–55) in China, the United States, the United Kingdom, and Germany.
Chan presented his findings in a lecture on Monday, April 15 at the University.
“Within one generation, inequality in China has gone from a Scandinavian level to to the Latin American level,” Chan said. “If you think the U.S. is bad, China is worse.”
Some of the inequality is caused by an increase in industrialization, according to Chan. With new technologies available, workers are able to transition out of low productivity, low wage jobs [and] into high productivity, high wage jobs.
Much of the income loss in China, however, can be attributed to the volatility of Chinese incomes. According to Chan, over a two-year period, 52 percent of Chinese people suffered a loss of at least a quarter of their income, compared to only 32 percent of Americans. In other words, Chinese incomes are less predictable year-to-year.
“There’s a lot more income instability in China,” Chan said. “Things are just more extreme.”
Chan explained that the instability stems from a lower average base pay for workers. In contrast to the United States and the United Kingdom, which have primarily salary-based compensation, China has workers who receive a higher proportion of their income off of performance-based metrics, which may differ from year-to-year.
Chan pointed to research by political scientist Mary Gallagher to explain.
“In China, liberalization of the labor market took place in a way in order to attract foreign investment. Different firms have to compete for loans and business and investment. There’s sort of a competition process between regions and between firms, drawing a downward spiral of worker protection,” Chan said.
The unequal distribution of wealth is prominent in China, not only between regions and between urban and rural areas but also when controlling for geographical location.
The lecture ended with the research’s concluding call to “examine the changing labor market and employment practices in China.”
The lecture took place at 4:30 p.m. in the Louis A. Simpson International building.
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