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China Income Distribution
Income differences in China since the 1950s have been much
smaller than in most other countries. There was never any attempt,
however, at complete equalization, and a wide range of income
levels remained. Income differences grew even wider in the 1980s as
the economic reform policies opened up new income opportunities.
More than two-thirds of all urban workers were employed in
state-owned units, which used an eight-grade wage system. The pay
for each grade differed from one industry to another, but generally
workers in the most senior grades earned about three times as much
as beginning workers, senior managers could earn half again as much
as senior workers, and engineers could earn twice as much as senior
workers. In 1985 the average annual income of people employed in
state-owned units was -Y1,213. An important component of workers'
pay was made up of bonuses and subsidies. In 1985 bonuses
contributed 13 percent of the incomes of workers in state-owned
units; subsidies for transportation, food, and clothing added
another 15 percent. One of the most important subsidies--one that
did not appear in the income figures--was for housing, nearly all
of which was owned and allocated by the work unit and rented to
unit members at prices well below real value. In 1985 urban
consumers spent just over 1 percent of their incomes on housing
(see Wages and Benefits;
Urban Society
, ch. 3).
The 27 percent of the urban labor force that was employed in
collectively owned enterprises earned less on average than workers
in state-owned units. The income of workers in collectively owned
enterprises consisted of a share of the profit earned by the
enterprise. Most such enterprises were small, had little capital,
and did not earn large profits. Many were engaged in traditional
services, handicrafts, or small-scale, part-time assembly work. In
1985 workers in urban collective units earned an average annual
income of -Y968. In the more open commercial environment of the
1980s, a small but significant number of people earned incomes much
larger than those in regular state-owned and collectively owned
units. Employees of enterprises run by
overseas Chinese (see Glossary),
for instance, earned an average of -Y2,437 in 1985, over
twice the average income of workers in state-owned units.
The small but dynamic domestic private sector also produced
some lucrative opportunities. Private, part-time schools, which
appeared in large numbers in the mid-1980s, offered moonlighting
work to university professors, who could double or triple their
modest incomes if they were from prestigious institutions and
taught desirable subjects, such as English, Japanese, or
electronics. Small-scale entrepreneurs could earn considerably more
in the free markets than the average income. Business people who
served as a liaison between foreign firms and the domestic economy
could earn incomes many times higher than those of the best-paid
employees of state-owned units. A handful of millionaire
businessmen could be found in the biggest cities. These people had
owned firms before 1949, cooperated with the government in the
1950s in return for stock in their firms, and then lost their
incomes in the political turmoil of the Cultural Revolution. In the
late 1970s and early 1980s, when these businessmen were politically
rehabilitated, their incomes were returned with the accrued
interest, and some suddenly found themselves quite wealthy.
Although the number of people earning incomes far beyond the normal
wage scale was tiny relative to the population, they were important
symbols of the rewards of economic reform and received a great deal
of media attention. In 1985 most of these people worked in
enterprises classified as "units of other ownership" (private
rather than state- or collectively owned enterprises). These
enterprises employed only 440,000 people out of the total urban
labor force of 128 million in 1985 and paid average annual salaries
of -Y1,373, only slightly higher than the overall urban national
average.
In China, as in other countries, an important determinant of
the affluence of a household was the dependency ratio--the number
of nonworkers supported by each worker. In 1985 the average cost of
living for one person in urban areas was -Y732 a year, and the
average state enterprise worker, even with food allowance and other
benefits added to the basic wage, had difficulty supporting one
other person. Two average wage earners, however, could easily
support one dependent. Families with several workers and few or no
dependents had substantial surplus earnings, which they saved or
used to buy nonessential goods. An important positive influence on
the per capita consumption levels of urban families was a decline
in the number of dependents per urban worker, from 2.4 in 1964 to
0.7 in 1985. In farm families the dependency ratio fell from 1.5 in
1978 to 0.7 in 1985. Farm incomes rose rapidly in the 1980s under
the stimulus of the responsibility system but on average remained
considerably lower than urban incomes. Household surveys found that
in 1985 average net per capita income for rural residents was -
Y398, less than half the average per capita urban income, which was
-Y821. The value of goods farmers produced and consumed themselves
accounted for 31 percent of rural income in 1985. The largest
component of income in kind was food, 58 percent of which was
self-produced.
Farm family members on average consumed much less of most major
kinds of goods than urban residents. For instance, a household
survey found in 1985 that the average urban dweller consumed 148
kilograms of vegetables, 20 kilograms of meat, 2.6 kilograms of
sugar, and 8 kilograms of liquor. At the same time, a survey of
rural households found that the average rural resident consumed 131
kilograms of vegetables, 11 kilograms of meat, 1.5 kilograms of
sugar, and 4 kilograms of liquor. Differences of a similar nature
existed for consumer durables.
Another indication of the gap between urban and rural income
levels was the difference in personal savings accounts, which in
1985 averaged -Y277 per capita for urban residents but only -Y85
per capita for the rural population. There was great variation in
rural income levels among different provincial-level units,
counties, towns, villages, and individual families. While the
average net per capita income for rural residents in 1985 was -
Y398, provincial-level averages ranged from a high of -Y805 for
farm families living in Shanghai to a low of -Y255 for the rural
population of Gansu Province.
The fundamental influence on rural prosperity was geography
(see Physical Environment
, ch. 2). Soil type and quality, rainfall,
temperature range, drainage, and availability of water determined
the kinds and quantities of crops that could be grown. Equally
important geographic factors were access to transportation routes
and proximity to urban areas
(see Internal Trade and Distribution
, ch. 8).
The highest agricultural incomes were earned by suburban units
that were able to sell produce and sideline products in the nearby
cities. Under the responsibility system, household incomes depended
on the number of workers in each household and the household's
success in holding down production costs and in supplying goods and
services to local markets. Most of the rural families with the
highest incomes--the "10,000-yuan households"--were "specialized
households" that concentrated family efforts on supplying a
particular service or good. Many of these families owned their own
equipment, such as trucks or specialized buildings, and operated
essentially as private concerns. An increasingly important
influence on rural incomes in the mid-1980s was the expansion of
nonagricultural rural enterprises, often referred to as "township
enterprises." These were factories, construction teams, and
processing operations, most of which were owned by collectives,
primarily villages, towns, and townships. Some were owned by
voluntary groups of families. Township enterprises were considered
by the government to be the main source of employment for rural
workers who were leaving agriculture because of rising productivity
under the responsibility system. By the end of 1986, township
enterprises employed 21 percent of the rural labor force. The
movement of rural labor into township enterprises helped to
increase average rural incomes because of the higher productivity
in nonagricultural jobs. In 1986 industrial workers in rural areas
produced an average annual value of -Y4,300 per person, compared
with about -Y1,000 per farmer in the same year.
The change in farm production from primarily collective to
primarily household operations is reflected in household survey
data on the sources of rural incomes. Before the 1980s farmers
received income in the form of shares of the profits earned by
their production teams plus supplementary income from household
sideline activities. In 1978 two-thirds of the net income of farm
families came from the collective, and only 27 percent was derived
from household production. With the shift to the responsibility
system these ratios were reversed. By 1982 the collective provided
only 21 percent of farm income, while household production provided
69 percent. In 1985 the collective share of farm income had fallen
to just over 8 percent, and the family production share had risen
to 81 percent.
Perhaps the most serious gaps in living standards between rural
and urban areas were in education and health care. Primary schools
existed in most rural localities, and 80 percent of the country's
primary-school teachers worked in rural schools. Secondary schools
were less widely distributed; only 57 percent of the total number
of secondary-school teachers served in rural schools. Most rural
schools were less well equipped, and their staffs less adequately
trained than their urban counterparts. Health care had been greatly
improved in rural areas in the 1960s and 1970s through sanitation
campaigns and the introduction of large numbers of
barefoot doctors (see Glossary),
midwives, and health workers. Most modern
hospitals, fully trained doctors, and modern medical equipment,
however, were located in urban areas and were not easily accessible
to rural families. In 1985 two-thirds of all hospital beds and
medical staff personnel were located in urban hospitals. The
economic reforms affected rural education and health care
positively in places where farm communities used their higher
incomes to improve schools and hospitals and negatively in
localities where the reduced role of the collective resulted in
deterioration of collective services
(see Health Care
, ch. 2;
Primary Education
, ch. 4;
Secondary Education
, ch. 4).
Data as of July 1987
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