Poverty and Inequality Reducing Policies in China

Introduction

China is one of the most populous countries in the world, with a population of approximately one billion (“National Bureau of Statistics of China” 2019). The large population has been blamed for the relatively high gap between the rich and the poor. Interestingly, even within these economic groups, inequality is also high. Inequality in the country has been caused by various factors. The first being that different cities and villages have different minimum wages.

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Chowdhury and Sundaram (2018) confirm that the differences in minimum pay for workers have ensured that different regions are wealthier than others. However, inequality in those regions is still high due to an increased cost of living. The minimum wages in these regions are determined by government and lobbyists. The issue of inequality has advanced poverty in the country. The rising cost of living coupled with little pay has ensured that the larger population of China lives below one dollar a day.

Also important to note is that there are several policies that have been used to try and curb the concern of inequality and poverty in the country. Since the two concepts have been associated with the large population, the government introduced the one-child policy to both controls the population growth and reduced the level of inequality and poverty in the long term. Whereas the approach worked in controlling the population, it did not achieve much in regards to reducing poverty.

This can be attributed to the fact that the income gap was still significant. This essay analyzes suggested policy options and instruments that the country can use to help lower inequality and poverty. A discussion on the effectiveness of the proposed policies will be presented as well as challenges that might arise in the implementation of said policies.

Potential Policy Options and Instruments

As stated, China has used several policy options and instruments to shape its culture and economy. This section of the essay proposes several policy options that can be used in China to reduce inequality and poverty. The decline rate of labor income has contributed heavily to the current income inequality and eventual poverty in China (Chowdhury and Sundaram 2018). therefore, a possible policy is the implementation of a standard minimum wage.

Chowdhury and Sundaram (2018) explain that due to the different economic challenges faced in various parts of the country, the government of China does not have a standard minimum wage. Indeed, there are some areas in China where essential commodities are easily accessible to the community. However, due to the large population in the country, these sections of the country also struggle with ensuring fewer people live below a dollar per day.

The suggested standard minimum wage will make it easier for citizens to move from one place to another in search of better opportunities without getting pay cuts. It is important to note that the Chinese move from one part of their country to another mainly due to the setup and recruitment of factory workers. Despite this, they leave their families in their previous regions and have to send money back for upkeep. The lack of a standard minimum wage creates an opportunity for employers to take advantage of their employees while tying the employees to their contract despite changes in living conditions (regions).

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To ensure this policy succeeds, it is critical that an evaluation of the economy be done. The results of the assessment will reveal the most expensive zones to live in, in China. The minimum wage of these zones should then be used as the country’s standard minimum wage.

A second proposed policy that can help reduce inequality and poverty in China is a revised version of the People’s Commune. Tan and Xuchun (2017) explain that the People’s Commune was a system that ensured farmers in rural China received the same payment as long as they worked within the agreed contract. However, there were several factors about this policy that actually led to the rise of inequality. Tan and Xuchun (2017) note that the fact that different regions had different payment rates for the farmers led to some villages being more flawed than others. In the suggested revised version, the standard minimum wage would be used to also determine how farmers are paid in rural China. This payment should be shared all over the country to ensure that no one section is wealthier than the other.

It is crucial to note that a majority of the rural Chinese people are farmers. Additionally, they are some of the poorest in the country. Thus, this policy seeks to reduce the inequality gap by securing the interests of the vulnerable community. If the standards of the poor are bettered while the middle of the rich remains the same, then the country will move towards an equilibrium. Also important to note, a majority of the poor farmers move to other regions in search of factory jobs. These are the same jobs that have been highlighted as inhuman due to the toxic work environment and little pay (Chowdhury and Sundaram 2018). It is arguable that the suggested policy would encourage these communities to remain in the rural areas and farm to make their lives better.

Effectiveness of the Proposed Options and Instruments

Both the suggested policies are effective in dealing with poverty and inequality in the country. The first, a standard minimum wage, will help reduce inequality and poverty in the state in various ways. The first is that companies will be able to pay people a minimum wage that ensures they can cater to their basic needs. Chowdhury and Sundaram (2018) argue that there are many things that a minimum wage should consider if it is to be used to lower poverty. For example, issues of health insurance should be noted during deliberations to ensure that the basic core needs of the employee can be catered for by that suggested minimum wage. It is arguable that catering to issues such as health, which has contributed heavily to the inequality gap, will help families save money that they would have otherwise used to fund out-of-pocket bills.

Also, the policy is effective as it also determines the amount of money foreign companies will pay locals for their services. Many international manufacturing companies outsource labor to China due to the fact that there is no minimum wage (Chowdhury and Sundaram 2018). Companies such as Apple, headquartered in the US, have been accused of encouraging the mistreat of factory workers after several employees associated with the company committed suicide (Chowdhury and Sundaram 2018).

One of the things that makes the establishment of a minimum wage difficult is the fact that many international companies might outsource their labor elsewhere. This would ideally negatively affect the income the country receives from foreign companies. However, it is debatable that human resource is much crucial than financial resources. Therefore, the comfort and well-being of the employees should always come before the profit margins.

The second suggested policy is also effective due to several reasons. The first is the argument that a significant percentage of the Chinese population are farmers. Campbell (2019) explains that the only factor that has pushed world-be farmers into the cities is the degrading state of Agriculture in the country. This policy would ensure that the farmers still working and those interested in working in the agricultural sector are assured of pay that can sustain them.

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The policy will improve the lives of the farmers and, in turn, improve the lives of the majority of the population. Ideally, there are several other factors that have to be considered to make this policy more effective. For instance, there should be accompanying policies that also guide the interaction between suppliers, manufacturers, and the buyer in the Agricultural sector. This will ensure that there is a seamless cost-saving mechanism across the board to improve the economy in general.

Debatably, the implementation of the revised People’s Commune will also help in the reduction of inequality and poverty as it will improve a whole village as opposed to an individual. Since the farmers in the villages will all earn the same amount of money, there will be little, if any, inequality in the villages in the long run. Arguably, more people will prefer to farm than work in the factories, which are highly saturated. This would ideally change the focus of trade. On the one hand, it will boost the Agricultural sector of the economy, which was initially one of the best in the world. On the other hand, it would reduce the number of people seeking to work in factories in the cities.

Challenges of the Proposed Options and Instruments

There are several challenges that arise with the implementation of any new policies. Both proposed policies will face similar challenges, whereas a few will be specific to their individual objective. One shared challenge is the impact the policies have on China’s relation with international corporations that depend on manufacturing. As mentioned previously, many multinational corporations outsource their labor to China.

This means that they set up or work in partnership with locals to identify factories where their products can be created or assembled. China has been able to attract some of the most famous and biggest manufacturing companies in the world to their economy for purposes of the creation and assembly of products. This has been facilitated by the fact that labor is cheap in China. Therefore, these multi-nation reduce the amount of money they would have otherwise used to get the same labor. The cheap labor is enhanced by the fact that the country is one of the most populous in the world, and job competition is high. Therefore, employees are willing to get little pay with no benefits just to survive.

It is expected that implementation of the suggested policies will allow international companies to pay more than what they are paying currently for the same labor. For China, this can be risky as some investors might decide to leave the country and look for cheaper options to ensure their profit margins are not affected. Additionally, such investors might realize that they would get the same labor at the same (new) rate in their own countries.

Such realizations and actions would negatively affect the larger China economy as the country would lose the income they were collecting from foreign companies. Notably, the only viable way of reducing such a risk is reducing the cost of living in the country. This would mean that basic commodities become cheaper to access and buy for the locals. In turn, the suggested standard minimum wage would also be lower compared to other countries that the international companies would consider if they were to move. Consequently, it would still be cheaper for these companies to outsource their labor to China.

An individual challenge for the People’s Commune policy is that the upcoming modern generation is not keen on farming as a source of livelihood (Tan and Xuchun 2017). This challenge is not unique to China but to many countries in the world. Thus, even though the older and middle-aged generations would appreciate the policy, the younger generations would not. In such a situation, young people would still relocate to the cities in search of “more modern” work in technology, government, and business, among other things.

It is important to note that during the implementation of the one-child policy, and several decades after that, the youth were the least percentage of the Chinese population. Today, as figure 1 in the appendix section shows, they are the majority of the population. This is a generation that has not grown up with ideals or interests in farming. Therefore, it will be difficult to entice them to take up farming in rural areas. One plausible way of attracting more youth into the sector is digitalizing it.

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Conclusion

In conclusion, China has tried different ways of reducing poverty and lowering inequality. Whereas the already implemented strategies have helped, a lot still has to be done to ensure that the income gap is significantly lowered and poverty is reduced in accordance with the first Sustainable Development Goal. The country’s population has been blamed for the significantly large income gap and poverty. Due to globalization, the Chinese have been able to move and settle in different countries. This, and the one-child policy, helped control the population. Despite these efforts, the country is still one of the most populous in the world. Solutions to reducing inequality should, thus, stop focusing purely on the population and incorporate other areas of the economy.

The essay proposes two policies that will be effective in reducing poverty and inequality in the country. The first is a policy on a standard minimum wage across the country. The country does not have one minimum wage. This has allowed employers in different regions to take advantage of their employees and offer them meager pay. The second suggestion is that of a revised People’s Commune, which focuses on farming and protecting the rights of the farmer.

This policy is deemed crucial as a big percentage of the older and middle-aged generation are farmers. One of the challenges that would arise on the implementation of the suggested policies is that they might affect the investment opportunities in the country. Many corporations invest in China as it offers cheap labor. Despite this, the country has other investment opportunities that they can offer that do not encourage poverty and a high-income gap.

Bibliography

Campbell, Charlie. 2019. “China’s Aging Population Is a Major Threat to Its Future.Time. Web.

Chowdhury, Anis, and Jomo Kwame Sundaram. 2018. Inequality and Its Discontents. Development 61 (1–4): 21–29.

National Bureau of Statistics of China. 2019. “China Urban Households Disposable Income per Capita.National Bureau of Statistics of China. Web.

Tan, Yan and Liu Xuchun. 2017. “Water Shortage and Inequality in Arid Minqin Oasis of Northwest China: Adaptive Policies and Farmers’ Perceptions.” The International Journal of Justice and Sustainability 22 (8): 934-951.

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StudyCorgi. (2021, July 2). Poverty and Inequality Reducing Policies in China. Retrieved from https://studycorgi.com/poverty-and-inequality-reducing-policies-in-china/

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StudyCorgi. (2021) 'Poverty and Inequality Reducing Policies in China'. 2 July.

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