A recent study has determined that while China's GDP has nearly reached America's levels, so have their levels of inequality. Inequality has increased substantially since the country has opened their doors to private enterprises. Now the poorer half of China is only receiving 15% of the country's pre-tax income.
This inequality is continuing at a bit of an alarming rate. From 1978-2015, the income of the poorer half of Americans fell by 1%, but this percentage is quintupled in China respectively. This dynamic is pretty interesting for a country that still considers itself communist.
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5 comments:
I think a way to combat this income inequality that China is facing is if the government engages in redistribution. As we discussed in class, if the government had an income tax or a tax on inherited wealth implemented where the money received would be redistributed to assist the lower income individuals then this income inequality would decrease and in the future the redistribution could help the development of human capital.
It is true that it seems impossible for the communist country to have inequality as high as a capitalist country, but I agree with Shaaref's comment that government can use redistribution to solve this problem. As far as I know, in recent years, Chinese government has paid a lot for the introduction of New Rural Cooperative Medical system, in which people living in countryside can get medical insurance by paying very little. This is a great benefit to poor people. Just as the article talks about, the rapid growth has lifted all boats. Even though the inequity has increased a lot, for most middle class families and poor families, they still benefit a lot.
China was previously seen as one of the more equal countries in the world according to a report by the World Wealth and Income Database. However, new estimates show China's top one percent hold double the share of national income. Higher income inequality and severe bottom income stagnation contribute to the higher wealth inequality in China. Unequal privatization is a prime reason as to now China is approaching america's level of income inequality. Due to the increase in private wealth at the expense of public wealth the government’s ability to redistribute income has been severely limited. The government must prioritize improving education, provide equal access to resources and impose progressive taxes to fix China ongoing issue before it reaches America's level of income inequality.
I thought that this article was interesting to read. I think that income inequality is a problem that most growing countries experience or will experience and it will be interesting to see how and if they will do anything to fix this problem. they could like we talked in class issue a stiffer inheritance tax so the top couple of percent cant just keep handing their wealth down from one generation to another.
Income redistribution to help develop human capital is a really good idea. I wonder if many members of society in China will be resistant to income redistribution, like the the USA. It is interesting to see how the development world market is because of increased efficiency but as a result a loss of equity.
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