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Economic Transition and Labor Market Reform in China pp 19–48Cite as

Palgrave Macmillan

Economic Transition and Change of Wage Structure

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Abstract

Wage determining mechanisms in China transformed between its planned economy period (1949–1977) and economic transition period (post-1978). It is known that market mechanisms did not function during the earlier period, when the government priced both labor and capital. After 1978, Chinese government enforced the market-oriented reform, the state-owned enterprises could determine the wage and employment by themselves partly. Does the economic transition affect the wage determining mechanism changed in China? Chapter 2 aims to investigate the effect of market mechanism on wage determination throughout the analyses on the effect of schooling years on wage, and compares their changes for a long term (the period from 1989 to 2011). It is found that the impact of market mechanism on wage determination becomes greater with the progress of labor market reform, particularly for the period from 2009 to 2011.

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Notes

  1. 1.

    According to internal labor market theory (Piore 1970), in institutional economics, wage decisions are also related to firms’ internal practices (e.g. payment and employment systems). However, it is believed that firms set wage levels by referring to market wages.

  2. 2.

    For more information on the Minimum Wage Act in China, please refer to Chap. 7 of the book; for the empirical studies of the effect of the Minimum Wage Act on the male and female wage levels in China, please see Li and Ma (2015).

  3. 3.

    Lin et al. (1996) and Nakagane (1999) pointed out that state-owned enterprises (SOEs) reform was promoted after the 1990s, but it was “an incompleteness reform” (radical restructuring did not occur) because government retained ownership of large SOEs.

  4. 4.

    The Urban Self-employment Management Ordinance (USMO) published in August 1987. Based on the USMO, the self-employment sector is defined as a privately owned business unit that employs one or two helpers and four or five workers.

  5. 5.

    Experience year = age-6-years of schooling.

  6. 6.

    Based on the questionnaire of CHNS, manufacturing worker (H) is high-skilled manufacturing worker, manufacturing worker (L) is low-skilled manufacturing worker.

  7. 7.

    For the wage gap between the public sector and private sector, please refer to Meng and Kidd (1997), Chen et al. (2005), Xing (2006), Zhang and Xue (2008), Ye et al. (2011), Demurger et al. (2012), Lu et al. (2012), and Ma (2009, 2014, 2016).

  8. 8.

    Regular worker is an individual who works for another person or enterprise as a permanent employee; irregular worker (I) is a contractor with other people or an enterprise; irregular worker (II) is a temporary worker; the self-employed (I) is self-employed, owner-manager with employees; the self-employed (II) is self-employed, independent operator with no employee; others composes the paid family worker, unpaid family worker, and others.

  9. 9.

    He (2009), Wu and Zhao (2010), Chang and Xiang (2013), Yao et al. (2014), Gao and Smyth (2015), Xia et al. (2016), and Ma (2018a, b) employed empirical studies and indicated that the higher-education expansion policy reduced the wage level of higher-education graduates.

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Authors and Affiliations

  1. Hitotsubashi University, Tokyo, Japan

    Xinxin Ma

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  1. Xinxin Ma
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Appendix

Appendix

Table 2.8 Summary of previous studies on the IRR in China
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Ma, X. (2018). Economic Transition and Change of Wage Structure. In: Economic Transition and Labor Market Reform in China. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-1987-7_2

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  • DOI: https://doi.org/10.1007/978-981-13-1987-7_2

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