Научная статья на тему 'A COMPARISON OF INCOME INEQUALITY IN CHINA AND RUSSIA AND THE IMPACT ON HUMAN CAPITAL'

A COMPARISON OF INCOME INEQUALITY IN CHINA AND RUSSIA AND THE IMPACT ON HUMAN CAPITAL Текст научной статьи по специальности «Социальная и экономическая география»

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Ключевые слова
INCOME INEQUALITY / EDUCATIONAL OPPORTUNITY / HIGHER EDUCATION / HUMAN CAPITAL / INCOME DISTRIBUTION

Аннотация научной статьи по социальной и экономической географии, автор научной работы — Weichang Chen

Both China and Russia in economic transition are facing the risk of widening income gap and increasing inequality. This paper analyzes the degree of income inequality between the two countries from the perspectives of Gini coefficient, income quintile and decile. The income distribution system aimed at maintaining the stability has failed to curb the expansion of income inequality. Instead, it has resulted in an unfair distribution of educational opportunities and huge differences in family education investment, which increasingly affects the quality of education, especially the acquisition of high-quality higher education resources. So income inequality has become the main obstacle to the accumulation and development of human capital. Only by controlling income inequality within a reasonable range through a more inclusive system and giving individuals fair educational opportunities can the stock and quality of human capital be improved.

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Текст научной работы на тему «A COMPARISON OF INCOME INEQUALITY IN CHINA AND RUSSIA AND THE IMPACT ON HUMAN CAPITAL»

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Journal of Economic Regulation, 2022, 13(2): 49-55 DOI: 10.17835/2078-5429.2022.13.2.049-055

A COMPARISON OF INCOME INEQUALITY IN CHINA AND RUSSIA AND THE IMPACT ON HUMAN CAPITAL

CHEN WEICHANG,

Southern Federal University, Rostov-on-Don, Russia;

Henan University of Economics and Law,

Henan, China, e-mail:1561310212@qq.com

Citation: Chen W. (2022). A Comparison of Income Inequality in China and Russia and the Impact on Human Capital. Journal of Economic Regulation 13(2): 49-55. DOI: 10.17835/20785429.2022.13.2.049-055 ™

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Both China and Russia in economic transition are facing the risk ofwidening income gap and increasing c\i

inequality. This paper analyzes the degree of income inequality between the two countriesfrom the perspectives ^

of Gini coefficient, income quintile and decile. The income distribution system aimed at maintaining the of stability has failed to curb the expansion of income inequality. Instead, it has resulted in an unfair distribution

of educational opportunities and huge differences in family education investment, which increasingly affects >

the quality of education, especially the acquisition of high-quality higher education resources. So income #

inequality has become the main obstacle to the accumulation and development of human capital. Only ^

by controlling income inequality within a reasonable range through a more inclusive system and giving s

individuals fair educational opportunities can the stock and quality of human capital be improved. o

Keywords: income inequality; educational opportunity; higher education; human capital; income §

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СРАВНЕНИЕ НЕРАВЕНСТВА ДОХОДОВ В КИТАЕ И РОССИИ И ЕГО ВЛИЯНИЕ НА ЧЕЛОВЕЧЕСКИЙ КАПИТАЛ

Russia and the Impact on Human Capital. Journal of Economic Regulation 13(2): 49-55. DOI: 10.17835/2078-5429.2022.13.2.049-055

ЧЭНЬ ВЭИЧАН, 2

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Южный федеральный университет, ^ Ростов-на-Дону, Россия; Хэнаньский университет экономики и права,

Хэнань, Китай, о

e-mail1561310212@qq.com ^

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Цитирование: Chen W. (2022). A Comparison of Income Inequality in China and ш

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© Чэнь В., 2022 о

Китай и Россия в период экономического перехода сталкиваются с риском увеличения разрыва в доходах и ростом неравенства. В данной статье анализируется уровень неравенства доходов между двумя странами с точки зрения коэффициентов Джини, квинтиля и дециля доходов. Система распределения доходов, направленная на поддержание стабильности, не смогла сдержать рост неравенства доходов. Вместо этого, сформировалось несправедливое распределение образовательных возможностей из-за огромных различий в инвестициях в семейное образование. Это все больше влияет на качество образования, особенно на приобретение высококачественного высшего образования. Таким образом, неравенство доходов стало главным препятствием для накопления и развития человеческого капитала. Только контролируя неравенство доходов в разумных пределах с помощью более инклюзивной системы и предоставляя людям равные возможности для получения образования, можно улучшить запас и качество человеческого капитала.

Ключевые слова: неравенство доходов; возможности получения образования; высшее образование; человеческий капитал; распределение доходов

Background

Both China and Russia are countries in transition. Before the transition, they implemented a highly centralized planned economy system and implemented a strategy of prioritizing the development of heavy industry. In terms of income distribution policies, ° they adopted an equalization model. After transformation, they have all reached the c\i level of moderately developed countries, but they have not gotten rid of the phenomenon 2 of widening income distribution gap (Cai, 2003: 16; Li, 2015: 21), and belong to countries 2 with a large gap between the rich and the poor. In Russia, radical reforms have enabled s a privileged few to gain enormous wealth, and socially marginalized groups have proliferated, resulting in a "two Russians" situation, where the richest and the poorest ® coexist, and polarization is evident (Goulin, 2012: 247). Polarization is the biggest and most critical issue facing Russia (Zhuang, 2011: 99—100). In China, which has the | largest population in the world, although economic growth has increased the income of g almost all social classes and avoided polarization, it has shown a trend of multi-layered § differentiation (Sun, Huang, 2015: 125), and there are class-solidified tendency. The g inequality caused by income distribution has attracted the attention and both of the ro countries have taken measures in many aspects which have achieved staged results, o but the problem of income inequality has not been effectively curbed, and even has a

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tendency to intensify.

Literature review

o The literature on the comparison of income inequality between China and Russia

is mainly concentrated in the early 2000s, around the consequences of Russia's failed transition and the lessons China should learn, namely, the manifestations of some o inequality problems and the measures of redistributive system in the early stage of ^ Russia's transition in the 1990s (Zhuang, 2011: 99; Gustafson, 2012: 76-81; Goulin, 2012: 248; Du, 2017: 28). Ostensibly, the problems of countries with economies in w transition show different forms. For example, Russia is a "two kinds of Russians" o and an oligopoly, while China is a "dual economy" which has caused the urban-rural ^ differences and regional differences. In fact, it is due to the serious imbalance in ^ the distribution of interests among various groups. As long as the mechanisms that ¡ij lead to the imbalance remain unchanged, both countries are under pressure to widen o inequality. Therefore, although many attempts have been made and some results have been achieved, the role of the redistribution system is weakening, and the inhibitory

gg effect of income inequality, especially on human capital, is becoming more and more

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obvious.

The main body 1. Comparison of the degree of income inequality between China and Russia In terms of Gini coefficient, China's Gini coefficient broke through the international warning line of 0.4 in 2000; Russia's Gini coefficient increased from 0.26 to 0.42 in 2008 (Fig. 1). From the perspective of income decile grouping, in 2012, the income of the richest 10% of Chinese people accounted for 41% of GDP, which was 14.9 times that of the poorest 10%; the income of the richest 10% of Russia accounted for 46% of GDP, which was 12.9 times that of the income of the poorest 10%. They far exceeded the internationally recognized safety warning line of 10 times (Fig. 2). From the perspective of income quintile, since 1999, The richest 20% has held about 50% of the social wealth, far exceeding other strata (Fig. 3).

Fig. 1. Gini Coefficient Source: World Bank http://data.worldbank.org.cn/indicator.

1988 1999 2000 2004 2006 2008 2010 2012 2014 2019

Russia 4.61 11.56 11 13.26 13.6 15.48 12.24 12.9 12.27 10.41

China 7.3 10.89 13.08 13.3 13.3 14.55 16.3 14.9 11.88 10.54

Fig. 2. Decile groups, ratio of top 10% income to bottom 10% income Source: World Bank http://data.worldbank.org.cn/indicator. The results is owned by the author.

Year 1997 1999 2005 2008 2010 2013 2015 2019

Income ratio

Russia High 45.1 43.8 47.7 48.5 46.6 48 45.3 45.3

Low 6.3 6.3 5.8 6.1 6.4 6.6 7 7

Ratio 7.16 6.95 8.22 7.95 7.28 7.27 6.47 6.47

China High 42.8 45.6 47.1 48.4 49.1 46.3 45.4 45.3

Low 7.2 6.5 5.9 5.2 5.1 6.3 6.4 6.7

Ratio 5.94 7.02 5.98 9.31 9.63 7.35 7.09 6.76

Fig. 3. Quintile groups, ratio of the highest 20% income and the lowest 20% Source: World Bank http://data.worldbank.org.cn/indicator. The results is owned by the author.

In order to maintain the consistency of the data, the statistical results of the World Bank are used. In fact, in China, whether it is the China Statistical Yearbook or the analysis of scholars, the Gini coefficient has always been higher than 0.4, even approaching 0.5. The proportion of wealth held by the richest people is increasing year by year. In 2020, the richest 1% of households own more than one-third of the country's property (Ren, 2021). In Russia, if taking into account other factors such as gray income, in 2017, the wealthiest

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1% in Russia owned 71% of total personal assets, while the international average for this indicator was only 46%. The 5% of the rich in Russia account for 82.5% of the total personal wealth, while the remaining 95% of the population own only 17.5% of the wealth (Diao, 2021: 60). In sharp contrast, 15-20% of the population in Russia has an income that can only support basic living needs; China's relative poverty and inequality are more severe than Russia's (Gustafson, 2012: 76).

The main reason why less than 20% of the residents can earn more than 50% of their income is that these 20% of the population can control or even occupy more than 70% of the production resources, especially many physical capital, human capital and land (Todaro, 1984: 168). In the model of market economy, as the main factor of production, the distribution of capital among individual residents or households largely determines the scale distribution of income. Income is the basis of all social activities. On the one hand, long-term income inequality will make the purchasing power of most residents low, which is not conducive to the formation of the market and the long-term economic development; On the other hand, it will cause social instability and increase the running cost of social transactions (Genoa, 2017: 15). Excessive concentration of income in the hands of a few high-income earners will affect the formation and development of the middle-income class. In 1998, the Russian middle class accounted for 5%-10% of the total population, and by the end of 2011, it was cm 20%-30% (Song, 2016: 38). According to the data of the National Bureau of Statistics of cm China, in 2020, the proportion of the middle-income class in China reached 30%, while it is ™ generally believed that the middle-income group should reach more than 60.

Due to the inequality of primary socialization between the rich and the poor in different ■h areas and fields, the available resources are also unequal, especially in education. These o initial inequalities gradually deepen the gap between the rich and the poor, and it is easy to form the "intergenerational transfer of poverty" (Zhao, 2012: 170) and the situation that the ® poor get poorer and the rich get richer (Song, 2016: 17). At the same time, the inequality of g education will further aggravate the inequality of income and fall into a vicious circle.

When a society is seriously divided in terms of income, social class, race, ethnic group or other deep social identities, the willingness to provide public goods and services by taxing it

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affecting the development and utilization of human capital. The widening gap between the rich and the poor has eroded and impacted the rational differentiation of social strata, and has become the main obstacle to the accumulation and development of human capital.

2. Income inequality inhibits the accumulation 3 and development of human capital

Stiglitz once said (2015) that income inequality affected the survival and development

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o of the majority of middle and lower class groups and limits people's feasible ability. People "" are the most precious resource that determines the speed and efficiency of economic growth, o and the adverse impact of income inequality on people is a great waste of resources. <5 Poverty caused by inequality prevents the cultivation of potential talents; the increase of unemployment rate caused by inequality is a direct waste of labor; the unfair opportunity caused by inequality has buried talents (Zhang, Wang, 2020: 56-57). When people subjectively perceive unfairness, it will also affect their behavior, leading to the decrease of productivity. o Education is one of the ways for low-income groups to move towards high-income class.

o However, the excessive income gap makes many children from low-income families lose w the opportunity to receive good education, which leads to the degradation of human capital o and further loss of the conditions for improving their income (Du, 2017: 30). The existing < and increasing income inequality is transforming into the inequality of access to quality Qc education (Genoa, 2017: 20). Family income level becomes the decisive factor of whether to ° receive quality education. Now the increasing income inequality leads to unequal access to

high-quality education (Du, 2017: 30). According to the statistics of the World Bank, the gross enrollment rate of higher education in China was 50.8% in 2018 and 86% in Russia in 2019. Higher education has entered the stage of popularization (World Bank, 2020). However, the average development and utilization rate of human capital in the world is only 62%, and only a few developed countries such as Europe and America exceed 70%. Both China and Russia are in the stage of not fully exploiting the contribution potential of human capital to the economy, which will lead to the waste of human capital and further deepen the income gap (World Economic Forum, 2017).

In modern society, higher education is an important way of human capital investment and the main means for individuals to realize social mobility. With the gradual deepening of the marketization of higher education, the proportion of educational expenditure to household expenditure is increasing day by day, and the problem of educational inequality caused by unfair income will further worsen. The inequality in the distribution of educational opportunities can be measured from two aspects: the one is the inequality in quantity. For example, the possibility of children in urban families getting higher education opportunities is much higher than that in rural areas; the other is the inequality in quality, that is, there is hierarchy in the same level of education. For example, children with middle-class family economic status have far more opportunities to go to college than children from ordinary families, especially rural families. Families with high social and economic status or well- g educated parents always look for various ways to maximize their children's educational opportunities (Chen, 2020: 115). China's higher education has shown clear social stratification ™ patterns and differences, and it is still maintained in the form of maximum inequality. c_ According to China Education and Human Capital Report, in 2000, the number of people in 2 urban higher education was 18 times that in rural areas, and the number of people in senior high school education was 4 times that in rural areas. There is a huge difference in the access to higher education between urban and rural students, which is largely determined by the difference in educational opportunities in senior high schools and previous stages. In i Russia, although the Education Law stipulates that all citizens have equal opportunities to s receive education, they can receive general primary to secondary education free of charge, and they can receive higher and further vocational education free of charge after passing the examination. However, as middle school graduates from low-income families and rural areas cannot enter first-class universities, the role of higher education as a factor of income differentiation is constantly improving, and the proportion of this factor has increased six times from 1992 to 2010 (Du, 2017: 30). Regional polarization leads to differences in

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educational family investment, and educational inequality will aggravate polarization. ^

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3. The impact of income redistribution policy on education equity &

The social redistribution policy of China and Russia doesn't aim at increasing productive o

investment or reducing income gap, but ensuring the minimum social welfare standard ^

(Remington, 2014: 81). The purpose of the reform in the field of social distribution is to serve o

the economic growth, instead of obeying the equal sharing of growth opportunities. The § income gap between the two countries is a function of the widening pay gap, which is the result of the economic reform strategy of the two countries. Although their governments have adopted some policies to reduce social and regional differentiation, such as inclining income

to the lowest income earners and increasing investment in infrastructure in backward areas, o

both countries lack a strong financial redistribution system (Remington, 2014: 82). o

Russia's fiscal revenue mainly comes from resources, so that it is subject to many unstable w

factors of resource income. Although the proportion has been increasing, the education o

investment, as an important part of social security, cannot be effectively guaranteed. <

According to the latest statistics from the World Bank, in 2016, Russia's education investment Q^

accounted for 3.7% of GDP, ranking 124th in the world (World Bank, 2020). Due to the lack o

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of financial input, the low treatment of teachers in higher education and the small number of people involved in scientific research, the promotion of scientific research and innovation ability in colleges and universities has been reduced. Nor can the government widely share the benefits and risks of economic growth between employers and employees or between the rich and the poor through effective institutional arrangements, which restricts the country's ability to achieve greater strategic goals.

For China, in 2019, government investment in education accounted for 4.04% of GDP, ranking 110th in the world, lower than the global average of 4.9%. According to the urban-rural dual economic system, there are obvious differences between urban and rural areas in the investment of education funds. The stock of human capital in urban areas is much higher than that in rural areas, and the influence of family economic conditions on personal education is increasing year by year. The result is a serious unfair distribution of educational resources, unequal educational opportunities for school-age population, and the educational opportunities of high-income people are significantly greater than those of low-income people. There is still a big gap in the proportion of people with higher education, especially in key universities. The inequality of education affects the formation of human capital between urban and rural areas, between regions and between individuals (Chang, Jiang, 2013), and then affects the inequality of labor market.

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^ In the early stage of economic growth, it is feasible to rely on comparative advantages

such as resources and labor. However, with the deepening of economic growth, the marginal ■h rate of return of capital gradually decreases, and the growth modes such as factor-driven and o efficiency-driven which rely on resources need to be changed to innovation-driven. Improving the marginal rate of return of human capital is the power source of innovation-driven. While ® attaching importance to the construction of social security system, the government should g pay more attention to the investment of human capital, strengthen the construction of human capital, and create favorable conditions for equal opportunities for citizens (Du, 2017: 31). The implementation of educational opportunity equity policy is a common problem faced

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national unified examination, Russia should increase the proportion of education in public service expenditure, make use of the transfer payment system to tilt educational resources to backward and poor areas, enrich the sources and channels of educational investment funds, improve the quality of basic education, and let more people enjoy the starting point and ^ opportunity of fair education. China lies in fundamentally breaking the dual economic system of urban-rural division, creating more inclusive development opportunities, controlling the income distribution gap in a moderate range, and narrowing the difference between urban

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direction and idea of further research.

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BRICS countries. Master Thesis. о

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