The Change Of Labor Income Share And Its Human Capital Effect In China

As the result of the initial distribution, elements shares have a decisive impact on the pattern of residents’final income distribution. Labor income, the main source of our urban and rural residents’income, its quota decline is widespread concerned by the community; but in fact accompanied by the share of labor income decline there exists a relative weakening of income levels, for which to discuss the share of labor income decline is particularly important. Meanwhile, human capital as an important factor affecting the returns to labor, it playing a significant role no doubt, this launches an in-depth study.Research on the share of labor income spread out from level re-estimated, effects decomposition and transferring pass:in part of the level re-estimated, based on revenue accounting method changes in the statistical project, the indicators proposed new formula, optima-zed the existing statistical adjustments; in part of the effect decomposition, the share of labor income has been allocated by numeric conversion, using the total differential index analysis we found the essential nature in changes in share of labor income; in the3rd part, on the bases of interaction system, simultaneous equation models behalf of human capital transferring pass are designed and GMM estimates about simultaneous equations panel data system and a follow-up sample simulation answer the human capital effect mechanism in the share of labor allocation. The results showed that, firstly by the accounting treatment of individual income, we reduced the share of labor income by about6%to restitute it about8percentage points lower the true distribution of the share of labor standards from1996to2007.Second, we divide the share of labor income into labor wage rate and labor productivity ratio, and with the international comparison China’s labor income share decline is founded to be composed by limited growing low labor productivity and low wage return in a more limited growth. Third, human capital determining wage return and labor productivity, raise wages return to bring the quota share lager on one hand and promote labor productivity to make the share smaller on the other hand; that is so called positive effects and negative effects. In the last ten years the positive effects of human capital was significantly weaker than its negative effects; negative effects of human capital, which was the dominant position resulted in a decline in the share of labor income. This is because in this period, both the high-level and average-level of human capital, their income returns were lower than their contribution to work. This result reflects the situation that the current return on human capital in China has a certain degree of inefficiency. What’s more, the lag effect of human capital considered improved average-level and high-level of human capital performance in the effects of labor share changes.Based on these findings, the paper advocated besides the share of labor income tendency, we should concern more about the high productivity and high wage rate to maintain a balanced distribution of the labor income. This can be helpful to achieve the double balance between development needs for a high level of labor income and competitive advantages of low labor costs. The main way to achieve this goal is the important transformation of human capital from knowledge to productivity, rather than the only pursuit of high-level education.