Decline In Relative Wage Share In China

Since1978, China has started the market-oriented economic reform. In this transitional period, social productivity developed rapidly and China even gets the praise of the "China miracle".Any kind of system design is a rule-making process, especially in economy field. In essence, Chinese social transition is a process of remolding the interest distribution mechanism that considers the income distribution as the key problem. During this period, rapid economic growth does not eliminate the negative factors affecting social development in China. Together with the remarkable economic achievements, there are a lot of new social contradictions. Among them, the income disparity and polarization attract more and more attention in recent years. While talking about reform, Deng Xiaoping pointed out in particular:"If our policy led to polarization, we failed." So, the inequality in income distribution not only exacerbate away from the goal of common prosperity of China’s socialist, it is also contrary to the original intention of the reform. Chinese Government has a clear understanding of the negative impact of the deterioration of income distribution, so the12th Five-Year Plan (2011-2015) period marks the perfecting income distribution system as one of the core issues,In the transitional period of China, the exterior environment and interior factors affecting the income distribution is extremely complex. In view of this, some scholars have proposed that no one factor is the dominant reason of deterioration of income distribution, but under the joint action of economic development, political development, laws, government management model, ideology, geographic environment, cultural traditions, social and psychological structure.The paper is organized as follows:Section I is the introduction of the research background, methods, and description of the relevant arguments and facts.Section Ⅱ is literature review. This part focuses on different understanding of different perspectives from theory of income distribution. And then the paper reviewed research on the decline of the proportion of compensation of employees.Section Ⅲ provides the object of this study—relative wage share, and its conceptual definition, meaning and the changes.Section Ⅳ describes the facts that occurred during the transitional period of China. This part examines social environment and aims to discover the factors that bring about serious consequences of the decline of relative wage share in the process of social transformation.Section Ⅴ focuses on the theoretical analysis. This part investigates the general characteristics of the profit-driven economic system and demonstrates that the driving mechanisms of the decline of relative wage share are endogenous factors in such an economic model. Subsequently, we select a number of key economic variables and analyses their effect in relative wage share decline by the panel date of30provinces from1997to2007.And this paper provides suggestions in Section Ⅶ.