Changes in the structure and prediction of earnings in Chinese state enterprises during the economic reform

Abstract

The question of payment and its determination has in China exposed tensions between socially embedded values and the functional requirements for modernization. These can be expressed respectively in terms of a traditional model, which predicts that earnings will be higher for people who are older, loyal to their unit and male, and a reform model, which predicts that earnings will be higher for people who have formal qualifications, have relevant training, hold positions of greater responsibility and are performing well and/or belong to a successful enterprise. The postulates of these two models, and the extent to which their relevance has changed with China's economic reform, are examined in the light of data on 144 job-holders in six Beijing state-owned enterprises, collected at two points in time, namely October 1985 and March 1990. The results indicate that in 1985 factors identified by the traditional model, especially age, were the most important predictors of earnings. By 1990 some movement towards the reform model had taken place, although age continued to have an important, albeit weaker, association with level of earnings and the link between pay and performance was still quite limited.