Statistical Research On Wage Differentials Between The State And Non-state Sectors

The phenomenon that the civil service examination has been hotter and hotter since2000makes a stark contrast with the popularity of the behavior of venturing into businessin the ‘90s. CHNS data reveals that, compared with the average wage in the non-statesector, the average wage in the state sector is lower before the year2000, but higherafter2000. Moreover, the wage advantage that the state sector has over the non-statesector is increasing rapidly. The average hourly wage in the state sector had been69.10percent above that in the non-state sector by2009.Wage differentials between the state and non-state sectors come from two sources,i.e., characteristic differentials between different sectors’ labor force and differentialsof wage determination mechanism between the state and non-state sector. Wagedifferentials from the former reflect the market competitiveness, while that from thelatter represent “unequal pay for equal work”, which is caused by the institutionalsegmentation in China’s labor market.“unequal pay for equal work” embodies thatthe market is lack of competitiveness, and it can do some harm to the allocativeefficiency of human resources, and further do harm to the economic efficiency. Labormarket is the most vital market in the modern economy. In light of the new featureoccurred since the21stcentury, this article provides important references andempirical support for evaluating China’s labor market’s reform process, pointing outthe existing problems and formulating relevant policies by undertaking acomprehensive and systematic study on wage differentials between the state andnon-state sectors after2000.Based on CHNS data from the year2000to the year2009, this article firstlyanalyses wage differentials and human capital differentials between the two sectorsfrom both the perspective of mean and the perspective of distribution. Secondly,different sectors’ semiparametric wage equations are established separately, and thenswitching model is used to correct the sample selection. By comparing differentsectors’ rate of return to education and different sectors’ wage curve with experienceas the independent variable, the differentials of wage determination mechanismbetween the state and non-state sector are studied. Finally, borrowing ideas fromtraditional decomposition framework, wage differentials between the two sectors aredecomposed into two parts which come from different sources. Then the extent of “unequal pay for equal work” is used to measure the degree of institutionalsegmentation, and its dynamic change mirrors the evolution of China’s labor market.Main conclusions of this study are as follows. Institutional segmentation exists inChina’s labor market indeed. The state sector has wage premium over the non-statesector, and the degree of marketization of the wage determination in the state sector isfar lower than that in the non-state sector. But as the market reform develops, the statesector’s competitiveness is improving step by step, and its wage premium is reducingin recent years. The state sector has advantage over the non-state sector both in thewage determination mechanism and labor force’s human capital, but the state sector’swage premium only occupy less than20%of the wage differentials, and theproportion is diminishing. Although the most of wage differentials comes directlyfrom characteristic differentials between different sectors’ labor force, the existence ofwage premium is an important factor that lead to the existence and expansion ofcharacteristic differentials between different sectors’ labor force. The existence ofwage premium triggers that labor force with high human capital fastens on the statesecor, while this kind of human resource is scare in the non-state sector. So the wagepremium does harm to the allocative efficiency of human resources, and maybe theroot of wage differentials. The government should take relevant measures to eliminatethe institution segmentation gradually, so as to realize the effective allocation ofhuman resource and the healthy development of the national economy.