The growth of wage inequality during a period of rapid economic development and reform in China raises questions about the nature of economic stratification in contemporary Chinese society. The most prominent explanation is that the transition to a market economy contributed to the growth of wage inequality by increasing the returns to human capital and skill in China. However, recent research suggests that the labor market in China is highly segmented across economic sectors because of preferential state investment and reform of strategic sectors. We contend that the growth and prominence of the financial sector in China empowered financial labor to obtain greater compensation, which created a wage premium in the sector. Drawing on nationally representative data on Chinese urban households, we test this argument by estimating adjusted wage differentials between financial and non-financial sectors across the distribution of earnings since the late 1980s. Estimates show that a wage premium emerged in the mid-1990s for low, median, and high earners in the financial sector. Over the next two decades, wage disparities within the financial sector increased as the wage premium shrank for low earners in the sector while expanding for high earners in the sector. We find that this dynamic is explained by growing occupational stratification in the financial sector, where the wage premium greatly expanded for the highest-paid managers and executives. Overall, this study extends the literature on contemporary economic inequality in China by identifying how excessive compensation among top earners in the financial sector contributed to wage inequality.
Financialization and Wage Inequality in Urban China: A Distributional Analysis of the Financial Wage Premium
Anthony Roberts is an Assistant Professor in the Department of Sociology at Colorado State University. His research focuses on understanding the impact of financialization, globalization, and development on income inequality in advanced and emerging economies. His work has appeared in the Socio-Economic Review, Social Forces, and the International Journal of Comparative Sociology.
Luoman Bao is an Assistant Professor in the Department of Sociology at California State University, Los Angeles. Her areas of specialization are aging, health, and family. Her research focuses on diverse aging experiences and intergenerational relationships in U.S. and Asian societies, as well as their implications for older people’s health and well-being. Her work has appeared in the Journal of Health and Social Behavior, Research on Aging, and the Journal of Aging and Health.
Anthony Roberts, Luoman Bao; Financialization and Wage Inequality in Urban China: A Distributional Analysis of the Financial Wage Premium. Sociology of Development 1 December 2021; 7 (4): 441–468. doi: https://doi.org/10.1525/sod.2021.0019
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