Dual Segmentation Of Labor Market And Determination Of Wage

With the advance of the market mechanism, the influence of the classical socialist system is gradually reduced. On the labor market, the determination of wage gradually shifts from the mechanism of command to the mechanism of human capital. However, the original system is still playing the role in the process of this transformation. Therefore, the dual segmentation of labor market has emerged. The first segmentation is divided by the mechanism of human capital, and the second segmentation is determined by the household registration system and ownership regime. Thus, this article attempts to explore two questions:(1) is there the existence of dual segmentation of labor market?(2) what is the role of dual segmentation of labor market to the determination of inner-occupational wage and outer-occupational wage?This paper first introduces the wage determination theory, and focuses on labor market segmentation theory through critiquing the neo-classical wage determination theory. Because the neo-classical wage determination theory only stresses on the force of human capital. But it’s lack of concerning the force of institution at the background of the transition of China. So, in this paper, the author introduces two kinds of institutions-the household registration system and ownership system.Then, the author uses cluster analysis to test the existence of the dual segmentation of labor market, and finds out that the influence of the ownership system on wage is gradually reduced. So the author constructs the model of the dual segmentation of labor market on the basis of Mincer wage equation. After dividing the wage into inner-occupational wage and outer-occupational wage, the author use the model to test the influence of the dual segmentation of labor market on wage. The result is that the mechanism of human capital occupies the dominant role on the inner-occupational wage, however, the mechanism of institution isn’t significant. But for the outer-occupational wage determination, besides the mechanism of human capital, the mechanism of household registration system is significant, which rural household plays the negative role for the outer-occupational wage. It illustrates that the inadequacy of the institution of social security is caused by the interference of household registration system.My suggestion is that the current reform should weaken the force of household registration system and reinforce the institution of social security. The government should innovate the management system of household registration system, and cancel the linkage between hukou and welfare, and therefore shorten the gap of treatment among different kinds of hukou.