Causes Of Income Inequality

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In the field of Social Sciences, inequality means the unequal distribution of wealth, power, opportunities, and benefits. Inequality takes different forms and has been categorized into economic inequality, social inequality, political inequality, and gender inequality. However, for the purpose of this research, I will focus on income inequality as it elaborates further on how wealth is distributed, the outcome of unequal wealth distribution, and how social outcomes are distributed within a population. With inequality present in modern day societies, whether in developed or developing economies, it is crucial to solve the problems inequality brings with itself and the negative impact it bears on poverty reduction, social stability and overall…show more content…
Most Chinese people view inequality as the sacrifice they need to pay for China to experience rapid for economic development and are eager for the country to develop at whatever social cost. Other causes of income inequality in China include the effects of economic reforms that was signified by the shift from egalitarianism to a more market-based income determination that ended up creating a pool of winners and losers within China’s demographic levels. In addition, the hukou system has been attributed as the major cause of income inequality in rural China and has even been referred to as a caste system that has widened the urban-rural divide in modern-day China. Considering the aforementioned, I will focus on the effects of the economic reforms, the role of danwei and the hukou system and how they continue to maintain income inequality in China…show more content…
As part of the reforms, state-owned enterprises restructured and a private industrial and service sector developed in urban areas, with wages determination changing to a reliance on human capital and skill. These changes then brought about huge difference sin the earnings and incomes of urban residents. On the other hand, the household responsibility system and off-farm employment opportunities based on township and village enterprises were established in rural areas but also brought about huge differences in income made by rural farmers and non-farm rural population. In addition, the implementation of policy measures designed to promote industrial growth within cities ended up greatly suppressing the agriculture sector and creating a large income gap between urban and rural households. The regional development policy as a result of the reforms have also caused the rise of income disparity among China’s provinces, with a difference being seen when comparing coastal provinces with those in the inland.
In regards to the role of work units (danwei), earnings and benefits are more equal among workers than across danwei. Therefore, even with the post 1978 economic reforms, the role of danwei was not diminished and it still remains as a tool for social stratification in contemporary China, since one’s earnings and benefits are dependent on the financial muscle of their
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