Archive for October 5th, 2010

Tuesday, October 5, 2010

Income Redistribution: “Full of Expectations”

Income inequality China is nearing the red line of what society can tolerate (接近社会所能忍受的”红线”), according to chinanews.com, (republished by Enorth on Monday), and has become a big obstacle to development. Or as the English edition of Huanqiu Shibao, the Global Times, quoted a researcher of the National Development and Reform Commission in August, as early as 2004, the Gini Coefficient hit 0.44, which was well above the internationally recognized warning line of 0.4, and thereafter it has become larger.

The article in Chinese attributes much of the existing inequalities to the absence of a reasonable income distribution between state-owned enterprises, private enterprises, and the incomes of citizens.  Measures such as minimum wages and limiting wages at those enterprises within the state-owned tier which often pay much higher wages than companies outside the monopoly sector rather seemed to indicate the problem, than to solve it. The general public was full of expectations concerning the government’s responsibilities to redistributes the shares in the wealth of society (如果说做大社会财富这个“蛋糕”是政府的责任,那么,分好这个“蛋糕”就是政府的良知,广大民众对解决分配不公充满期待).

Hysohan Wikimedia graphics: Global Income Distribution (based on World Factbook Date)

Hysohan Wikimedia graphics: Global Income Distribution (based on World Factbook Date) - click on this picture for more information

According to the CIA’s World Factbook data, China’s Gini coefficient, among the BRIC countries, would look better than Brazil’s and Russia’s, but not as good as India’s – that said, the report’s latest statistics from India date back to 2004:

country coefficient year previous
Brazil 0.567 2005 0.607 (1998)
Russia 0.423 2008 0.399 (2001)
India 0.368 2004 0.378 (1997)
China 0.415 2007 0.40 (2001)

The inefficiencies deplored by the media above may also be a factor behind a lack of white-collar jobs in China as described by Huang Yasheng, an MIT economist, who told the BBC‘s Chinese service in February last year that every additional percent in GDP added less to employment and family incomes in China. India’s investment only amounted to 50% of China’s, he said in an interview with Nanfang Daily, also last year, but still created still economic growth that amounted to 80% of China’s economic growth.

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