Since the reform and opening up, the income gap in China has widened as the economy grows rapidly. According to data published by the National Bureau of Statistics, the overall Gini coefficient of residents across China has been higher than the international warning line. The wide income gap is mainly reflected in disparities between urban and rural areas, different regions, sectors, and different earning groups.

Wide income gap

Internationally, China is a country with relatively wide income gaps. The excessive income gap is seriously restricting the pursuit of common prosperity. Therefore, it is crucial that we promote common prosperity and effectively narrow the income gap through high-quality development. This means that “economic pie” should not only be made bigger, but also be divided equitably, so that development achievements can benefit all people more fairly.

To better distribute the “pie,” we should vigorously ensure that the starting point of income distribution is fair, so that citizens can be provided with relatively equitable opportunities in education, health care, and employment. To achieve educational equity, we should foster the relative equity of “hardware” conditions and resources between urban and rural areas and across regions, including financial expenditure for education and schooling facilities. Meanwhile, we need also offer equal educational opportunities for children from low-income families, migrant workers’ children, and other special student groups through special funding. In addition, it is also necessary to provide professional knowledge or skills training courses for low-income individuals, laid-off workers, and other groups, so as to enhance their employability.

To realize equity in the medical sector, it is necessary to redistribute medical and health resources to rural and less developed areas and strengthen support for vulnerable groups through basic service offerings.

Cultivating middle-income gap

The middle-income group generally refers to a group whose income is at the medium level when compared with other social groups, whose jobs are relatively stable, and who live a life of relative wealth. In addition, this group is usually risk resistant, and generally regarded as the cornerstone of social harmony and stability. The “olive-shaped” income distribution pattern, with the middle-income group as the main body, is recognized both domestically and intentionally the most stable social distribution structure. Expanding the middle income group’s proportion is thus considered to be the prerequisite for pursuing common prosperity.

So far, in China, the middle-income group’s proportion within society still needs to increase. The current size of this group, which is described in some studies, still falls short of the ideal middle-income group size. With poor risk-tolerance, the group faces the possibility of falling into the low-income group at any time. In this sense, there is still a long way to go before the “olive-shaped” income distribution pattern is realized.

The income distribution pattern in China is currently bottle-gouard, with the middle-income group proportionately small, and actual income level still relatively low. It is still disproportionately small compared to Switzerland, the Netherlands, and other high-welfare countries that have already realized the “olive-shaped” income distribution pattern. Therefore, to promote common prosperity through high-quality development, the key is to cultivate the middle-income group.

Cultivation of this group demands efforts on two levels: the first one is to “raise the low-end,” which improves the incomes of those in the low-income group and their ability to withstand risks.

For low-income groups in rural areas, on the one hand, we need to prevent them from falling back into poverty or remaining stuck at a low-income level. A daily monitoring mechanism needs to be established to identify residents who may fall into a low-income situation in the future and offer them aid. On the other hand, we should also establish a reasonable income-growth mechanism for potential middle-income members within rural low-income groups. Among urban low-income groups, migrant workers in cities constitute an important part of the future middle-income group in China. It is thus necessary to improve their wages through optimizing the minimum wage policy.

The second priority is to “expand the middle-end.” The measures should include continuously strengthening income stability for the current middle-income group and avoiding cases where they may plunge to the bottom of society due to unforeseen circumstances. In addition, better jobs and more investment opportunities should be offered to expand the scale of the middle-income group. Specifically, information technology and digital technology can be adopted to alleviate the greatest extent of mismatches between the labor supply and labor demand. In addition, it is necessary to further optimize the capital market and offer more investment opportunities with the purpose of improving property income for middle-income groups and diversify the sources of their income. This is the inevitable requirement for steadily expanding this group’s range.

Zhou Yunbo and Huang Xingzi are from the Center for Studies of Political Economy and School of Economics at Nankai University.