The Research Of The Determinants Of The Share Of Labor Income In China

The Twelfth Five-Year Plan clearly pointed out we should reach aims that weshould make effort to achieve growth in residents’ income and economic developmentsynchronously, to achieve labor remuneration growth and productivity of labourimprovement synchronously. To increase the income of residents is mainly referred toimprove the labor income of low and medium income groups, the main components ofwhich are the share of labor income. At the same time, the share of labor income is themain component of the labor remuneration. How to improve the share of labor incomeeffectively were the main point of this article and the purpose of the study.Based on the theory of determinants on the share of labor income, we did theempirical research on the share of labor income of Chinese28provinces, and wedepicted the trends of change of it. Then we explored the determinants of the share oflabor income, and mined the path that decisive factors effect on it. At the same time,we did the international comparisons with the current situation of the share of laborincome and the determints of developed countries and BRICS (excluding China).Through the empirical research and international comparison, this article comed to thefollowing conclusions. The constantly rising proportion of increased tertiary industryvalue accounted for GDP, the high unemployment rate, and constantly enhancedalternative elastic of capital on labor, and the use of labor saving technology willsignificantly reduce the share of labor income. The effect of foreign direct investmenton the share of labor income depended on the effected size between wage overflowand technology overflow. If profit distribution is conducive to the share of laborincome, the improvement of ratio of dependence on foreign trade will increase theshare of labor income. The reason of notobvious effect of increasing investment ineducation on the share of labor income was that the return on human capital in Chinais very low, or even negative. The low-income groups’ burden of Chinese personalincome tax was heavier while that of higher income groups is lighter, which wasdetrimental to the share of labor income.We alse found that the U relationship is not steady between the share of laborincome and economic development. In another words, the aim to increase the share oflabor income could not simply rely on raising the level of economic development.Therefore, in order to improve our country’s share of labor income, we should accelerate the upgrading of the industrial structure, improve the proportion of tertiaryindustry accounted for GDP, make personal income tax system more perfect, expandemployment, lower unemployment rate, and rise up the return rate of human capital.