In many industrialized areas in China, the labor force’s “share” of GDP, meaning the proportion of provincial output that is distributed as wages, rather than going to capital and government, fell between 1997 and 2007, say Wei Chi of Tsinghua University and Xiaoye Qian of Sichuan University. For example, in Guangdong, it fell from 49% to 39%; in Chongqing, from 57% to 48%; and in Sichuan, from 56% to 46%. Past research has shown a connection between low labor share and widening inequality in China. Moreover, a low labor share poses problems for China’s goal of transforming its economy to rely on consumption rather than exports.

SOURCE:  Regional disparity of labor's share in China: Evidence and explanation

This blog first appeared on Harvard Business Review on 4/21/2014.

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