Occupational Classes, Inequality, and Privatisation

The analysis shows that privatisation seems to be related to income distance when comparing the service class to working and agricultural classes. The higher degree of privatisation in a prefecture, the higher income inequality there is between occupational positions. It seems that privatisation is connected to income inequalities, based on stratifying principles that reward individuals and social groups differently based on the individual’s occupational position, and that privatisation contributes to enlarge the wage differences between occupational positions. This finding can be conceptualised in terms of market segmentation theory. The primary segment consists of well-paid, high-skilled jobs, and the secondary segment consists of low-paid, low-skilled jobs. Jobs in the service class are typically located in the primary segment, while working class and agricultural jobs can be placed in the secondary segment. A larger private sector can contribute to increase wage stratification

between different segments, partly because of rising returns to education, and increased use of bonus and rewards systems, especially in the private sector.

occupational licensing is a new phenomenon that did not exist in the planned economy. Both

occupational position and organisation of work are important contributors to higher wage inequality in the Chinese market transition process. Occupations, no matter if defined as political or market oriented jobs, have significant effect on income inequality (Bian & Logan 1996: 752). Zhou have found that rising urban income inequality is connected to rising returns to education, and that the work organisations are central for the distribution of resources. Furthermore, he concludes that a growing private sector has had substantial impact on the income distribution in the reform period up to 1994 (Zhou 2000). Park et al. found that rising returns to skilled labour is one of the important factors for increased wage inequality in China (Park et al. 2003: 15). Blecher (2005: 7-8) points out that the working class and agricultural class in China has been facing larger inequality and

disadvantages in the market oriented economic reform period. Knight and Song (1995: 105) have also found wage differences in urban China caused by occupational differences during China’s economic reform. Moreover, Knight and Song found an important and strongly connected

relationship between education and occupation, which means that education raises the income level both directly and indirectly as it improves an individual’s chance of getting a well-paid occupation (Knight & Song 1999: 105).

I found as well that the occupational impact on income inequality is strengthened to a large extent when the degree of privatisation increases. Although it is difficult to directly compare which factor has the most important impact on income inequality, the multilevel analysis shows that class-based inequality is tightly connected to educational attainment, as assumed by Knight and Song. When comparing individuals with higher and lower education, the occupation-based inequality appears to decline. In other words, persons with higher education are facing less inequality when considering their occupational classes.

Once again, the occupation-based inequality affects some social groups and individuals with certain characteristics differently than it affects other groups or persons without the same qualities. When comparing an individual’s income to the service class, factors that contribute to higher equality can for example include to be employed in higher occupations, or being urban resident, or to have higher educational attainment. Generally, there is also more equality for males than females. Individuals with one or several of these mentioned characteristics seems to be favoured across different social contexts, and they have less risk for income inequalities across all the social

divisions I test in my analysis. These factors and certain characteristics connected to favoured social groups seem to function as boundaries between social groups, and point to important principles of

stratification, which contribute to the formation of income inequality in general.

Occupational classes and education seems to serve as social categories that create and maintain social inequality and boundaries, while dividing between different social groups. As recognised by Wang, “members in such social categories share a characteristic that allows them to have access to resources and opportunities without being confined to a common, local physical space.

Examples…include gender, ethnicity, citizenship, religion, geographical origin of ancestors,

occupation, education, and age” (Wang 2008: 17-18). Further, in the context of China in the process of privatisation, Wang identified that inequality was not only created by coercive physical forces or political powers, but also by social boundaries that could reach goods and benefits without explicit forms of exploitation and forces (Wang 2008: 18). Privatisation can have a function of reinforcing social boundaries and exclusion mechanisms in a more market-oriented China, based on the ideology that individuals with different abilities should be rewarded differently, and that education and occupation are symbols for individual productivity and ability. However, it is arbitrary to conclude that there is a causal relationship between privatisation and higher income inequality, and we can neither claim that privatisation has a main effect on, or has caused or led to social

boundaries such as education and occupational divisions. Even when we can observe that there is correlation between these two factors, we cannot control for all other variables on the structural level, and of course, other factors than privatisation contribute to uphold social structures. In addition, it is difficult to answer the question of why there in some prefectures is a higher degree of privatisation than others, and how privatisation is concretely connected to the social policy,

economic development, and income distribution.