Institute for Research on Labor and Employment

This paper re-measures the labor’s share of GDP since the reform and opening up by amending and supplementing the corresponding data during 2004 to 2007. We find that the labor’s share decreases steadily after 1998. The paper also further divides labor into raw labor and human capital. By using the individual level data of UHS, we find the human capital’s share has increased rapidly while the raw labor’s share decreases steadily during 1988 to 2007. By using extended MRW growth framework, we find that the movement of China’s national income distribution pattern is closely related to the unbalanced growth of three factors which are physical capital, human capital and raw labor. The high growth rate of physical and human capital bring upward trend of their income share, while the stagnant state of raw labor will bring its share to decrease rapidly. By using various sources of factor growth data from 1995 to 2007, we confirm the inference of the extended model. And we find that the steady growth of physical capital, the slowing down of the growth rate of human capital, and the negative growth rate of raw labor are the causes of decreasing labor’s share of GDP during 1998 to 2004. Relate raw labor with minimum wage, we suggest that the unmatched economic contribution and return of rural surplus labors is the key to understand the leaning of national income distribution towards capital. And we suggest that the main approach to achieve harmonious distribution relations is to raise the labors compensation of such people.