Income Inequality Evident in Four Areas

Dr. Sen Gong, of the Development Research Centre of the State Council, wrote a five-section report, "Inequality in China: A Case Study", with Associate Professor Bingqi Li, from Australian National University, and Save the Children UK, helping to address the root causes of inequality in opportunity and outcomes, as China seeks to pave the way for sustainable economic growth and social development.

Rising Inequalities in Outcomes and Opportunities (Section 2)

According to World Development Indicators, gross domestic product (GDP) per capita increased from $524 in 1978 to $4,433 in 2010. Annual household expenditure was ten times higher in 2011 ($932) than in 1978 ($90), but economic growth and income distribution are very uneven, which has caused the greater in inequality.

Social disparities are mirrored by large gaps between the richest and poorest citizens, with mean incomes of the richest decile some 25 times higher than those of the poorest decile. It is estimated that the richest 10% of the population could be earning more than 50 times the average income of the lowest 10%.

Income inequality is evident by:

Types of employment – Employees in monopoly enterprises on the whole earn more than employees in other sectors. It is estimated that more than 50% of the wage gap between monopoly industries and competitive industries is not justified, and can only be explained by the monopoly status or the state-dominated nature of these companies

Nature of labor contracts – Dispatched laborers sign contracts with agencies that assign them to organizations and enterprises that need workers. The total number of dispatched workers could be as high as 60 million, accounting for 20% of the urban labor force in China. Generally, dispatched workers are paid at least 30% less on average than contracted employees for the same work.

Geographical region – Rural-urban income differences and regional inequalities are together estimated to account for two-thirds of overall income inequality. Since the 1980s, rural households have earned much less than urban households on average, and their incomes increase at a much slower rate. Regional disparities have also recently experienced a similar reverse in the general trend. Based on both per capita household consumption expenditures and per capita household incomes among provinces, the changes in regional inequality are almost the same.

Household expenditure – The average consumption of the highest quintile was 15 times that of the lowest quintile. If we examine urban areas only, 6% of the urban population earned between $16,000 and $34,000; only 2% exceeded $34,000. For people at middle-income levels, the average expenditure of a household increased faster than household income, due in part to increasing consumer prices. Also, the average household now needs to spend on public services that used to be provided for free, such as housing, healthcare and education.