– Education did not significantly increase income . – Communist Party membership, being male, and having more seniority on the job were all associated with higher incomes. ● The private return to education was very close to zero Human capital: · Human capital is the resource that is created by investment in knowledge. · Like physical capital, human capital is a factor of production , that is, a basic resource that is used, but not used up, in the production process. · Like physical capital, human capital is produced by prior activities . · Education is the most important producer of human capital, · can also be created by on-the-job experience, by investing in good health, or through other investments. · Human capital is different from physical capital because it is not tangible : you cannot see it or touch it. · Human capital does have an owner . An individual “owns” the human capital that is created by his or her education. The higher income that is created by a better-educated worker belongs to the worker. · Return to human capital = “knowledge premium”: the additional earning power a better-educated worker commands. Increasing Value of Skills · Earnings gap between college-educated and non-college educated workers has widened in recent decades in the US Other Attributes · Work experience o Virtually identical to age in China o Rewarded in socialist China with an essentially seniority wage system o During reform era, returns to experience have declined moderately but the have not disappeared · Employment by ownership o Variation in returns to education by ownership type and sector have tended to narrow over the years o No good enough data to track the differences in returns between urban residents and rural-urban migrants · Membership in China’s Communist Party o Economic benefits for individuals and that these benefits have continued or increase during reform · Gender o During the socialist period gender gaps in wages were relatively modest o Gender gaps have increased in the reform era 3. Social Security
· Defines characteristics of the formal sector of the urban labor market · Critical issue for China’s future · Old system: urban workers routinely enjoyed social security as part of their employment under the “work-unit” system: o Work unites paid pensions to their own retirees out of their own profits o Number of retirees not large, since enterprises were not profit maximizing or competitive firms, funds were not an issue · Moving towards a market economy, it’s essential to move the entire social security system out of the work unit’s control and shift it to a national social program administered by government agencies. Challenges of building a national social program · Social security must reach a minimum level of match expectations and succeed politically · Older firms with many retirees would be heavily burdened. Pension funds must absorb the payment obligation · Population aging at a rapid speed and at an unusually low level of per capita income.
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- YI LI
- Socialism, Labour economics