A Moderate Level Of China’s Labor’s Share Promotion And Its Realization Path

Changing in China’s labor’s share, the influencing factors and the enhancing levelhave been the focus of many scholars. Most of scholars agree that China’s labor’s share isin a quite low and stable state. At the same time, it’s influenced by the economic growth,capital deepening, opening to the outside world, education level, nationalization,industrial structure, and other factors such as government intervention. However, themoderately elevated level of labor’s share is rarely measured.This paper studies the relationship between the labor’s share and the impact factorsfrom a long-term point of view by building a vector error correction (VEC) model. Afterthe co-integration test, lag structure test and stability test for the model, this paperestimates the moderate level of China’s labor’s share by combing with the study ofChina’s secondary industry trend and China’s actual economic development facts.The study finds that China’s labor’s share is influenced by the development ofeconomy, the level of opening to the outside world, the level of education, the industrialstructure as well as the level of industrialization, and the government intervention, whichare represented by per capita gross domestic product (GDP) and its squared term, thetotal import and export of GDP, the average years of education, the proportion of addedvalue in the second industry of GDP, and fiscal expenditure proportion in GDP. All theabove factors can explain for the89.82percent reasons why the labor’s share changes.The model’s F-statistics, as well as the AIC and the SC values of the overall model,which are only-33.21and-25.19, are quite small. All the above indicate that the overalleffect of the model is ideal.In the long run, China’s labor’s share is most affected by the industry structure.Every1%increase in the added value of secondary industry in GDP will lead to adecrease of approximately4%in the labor’s share; while each1%increase in thegovernment spending in GDP will causes a decrease of approximately0.2%in thelabor’s share. The above analysis reflects the long-run equilibrium relationship betweenthe labor’s share and the discussed both factors. The coefficient of the error correction term reflects the adjustment of the long-term equilibrium to the short-term deviation. Inthe model, the coefficient is-1.3117, whose change direction meets the requirements ofthe convergence model and the adjustment is powerful. This paper takes the Verhulstmodel’s predicting results of the second industry as a benchmark, to get the results thatChina’s labor’s share in2020and2025will increase to52.48%and56.46%respectively.These two moderate levels not only coincide the level of other countries and regions inthe same stage of development, but also well consistent with the policy framework of theactual situation in China.Finally, on the basis of the theoretical model, this paper analyzes the path topromote China’s labor’s share based on the empirical researchies, and puts forward thecorresponding policy recommendations mainly from the view of two perspectives of theprocess of industrialization, the dual economic structure, the transformation of industrialstructure and the institutional factor.