The Level Of Technology And The Level Of Wage

The development of China is always the focus of foreign economists. Since the open-door economic reforms of 1978, China has enforced the communication with outside. The outside world also has more chances to realize China. In this time, Deng Xiaoping introduced the strategy of"Allow some people and areas to get rich first."This theory plays an important part in the Chinese economic development. In the precondition of the idea of"efficiency comes first", Chinese economic achieved average annual growth of 9%. However, the fairness didn't get enough attention. So from the 1990's, we found the income inequality increased a lot. And now, the Chinese income inequality has draw attention of the foreign economists. The experts of WB estimated the Gini coefficient of China in 1981 was 0.31, and reached 0.447 in 2001. According to another calculation(Khan and Riskin, 2004) the Gini coefficient of 2002 was 0.46. The income inequality is in a high level compared to other countries. The high level of China income inequality will directly influence the further economic development and the politic stabilization. Therefore, there are a lot of economists actively investigate the problem of China income inequality. On the one hand, they hope that they could give same advices to solve this problem; on the other hand they hope the experience of China could be helpful for other developing countries.In the field of economics, decomposing factors of income inequality is a fashion way to analyze. This method can effectively make economists concentrate on limited problems. So there are a plenty of research outcome. This paper tries to research the wage gap between skilled and unskilled workers in China.In the last two decades, the proportion of skilled worker increased a lot and the wage inequality also widened in U.S and other western countries. Economist mainly through the changes of technology development,international trade and labor market to analyze the wage problem. These changes reflect in economical influence of the IT industry's arising which makes the institution of enterprises change; the international market further open up; the proportion of workers who get higher education improve; the inter-country customs duties decrease; the investment of multi-national corporations increase continuously, and the poweT of labor union decrease. In general, before-mentioned influences are the causes of technology change and also determined by the changes of technology. The emergence of universally used technology such as PC technology improves the skill premium and the relative wage of skilled workers. This makes more people glad to get higher education. Meanwhile, the reform of education system and the education subsidization by government provide more chances for people to study. These two reasons improve the proportion of skilled worker, widen the extension of new skill usage and increase the speed of the innovation of skills.The Chinese large firms are concentrated in cities, so the intra-firm wage gap is important for the intra-city income inequality. Before the reform, the wage level was determined by the government, so there was no obvious income inequality. However, after the reform the foreign investment came in, the competition in the market became fierce, the labor market was relaxed, then the wage gap widened. In this paper, we find that the relative wage of skilled and unskilled worker is influenced a lot by the number or non-state corporations.In this paper, we first review the literature which analyzes the relation between the level of skill and the level of wage. After the review, we find that most of the research used the family level or firm level data. We use the statistic that the government announced and find some interesting result. The relation between FDI and skilled worker wage is the focus of this paper.After our positive analyze, we find that the FDI improve the whole skill level and the labor skill. It also improves the competition of local company and the relative wage of skilled and unskilled workers. The FDI can be divided into two groups: Export-oriented FDI and the Import-oriented FDI. The Export-oriented FDI raises the wages of unskilled workers, lowers the wages of skilled workers, and lowers the skill premium. While the Import-oriented FDI lowers the wages of unskilled workers, raises the wages of skilled workers, and raises the skill premium. We also find that a larger employment share of state-owned enterprises is associated with greater wage inequality. This effect increases with the amount of FDI received by a province.In addition, we find that there are competitive relation between SOEs and foreign-funded enterprise. The number of SOEs also affects the wage level and wage gap. FDI affects wages directly by creating a demand for labor, but this demand may be disproportionately for skilled labor or for unskilled labor, depending on the type of FDI. It affects wages indirectly by influencing the economic environment in which other enterprises exist. Specifically, we find evidence that a larger employment share of SOEs is associated with greater wage inequality in provinces that receive more FDI. SOEs are responding to competitive pressure to attract skilled labor by paying higher wages than the otherwise would. In doing so, the inefficiency of the SOEs forces unskilled workers to earn even less. So if the city which has a high proportion of SOEs, the wage gap between skilled and unskilled worker is wider.