Author: Song Xiaowu (Professor, China Institute of Income Distribution, Beijing Normal University)
Since the reform and opening up, we have learned from the experience and lessons of developed market economy countries, combined with the actual situation in China, and after arduous exploration, we have initially established a socialist market economy distribution system. Since the 15th National Congress of the Communist Party of China, the CPC Central Committee has repeatedly reiterated its adherence to the distribution system with distribution according to work as the main body and multiple modes of distribution coexisting. In 2019, the Fourth Plenary Session of the 19th CPC Central Committee adopted the Central Committee of the Communist Party of China’s Decision on Several Major Issues Concerning Upholding and Perfecting the Socialism with Chinese characteristics System and Promoting the Modernization of the National Governance System and Governance Capacity, which juxtaposed the distribution system of "distribution according to work as the main body and coexistence of various modes of distribution" with "socialist market economic system" and "public ownership as the main body and common development of various ownership economies" and raised it to a basic socialist economic system. Practice has proved that the distribution system with distribution according to work as the main body and coexistence of various modes of distribution has greatly mobilized the enthusiasm of enterprises and employees and provided a basic platform for the sustained and rapid growth of China’s economy, which we should adhere to for a long time. At the same time, we should also see that in the field of distribution, the problem of imbalance is increasingly prominent and the problem of inadequacy still exists. On the road to common prosperity, how to further deepen the reform of the distribution system and build a coordinated income distribution system of primary distribution, redistribution and tertiary distribution is a new challenge.
Primary distribution, redistribution and tertiary distribution are closely related to each other, and each of them follows different principles. Primary distribution is the foundation. Under the condition of socialist market economy, the market plays a decisive role in the allocation of resources. Labor, land, capital, technology, management and data should all be allocated by the market, and each should be rewarded according to its contribution. The secondary distribution is based on the primary distribution. Without the reasonable and legal primary distribution of income from all walks of life, it is difficult for the country to establish a standardized secondary distribution system including basic social security, taxation and financial transfer payment. The third distribution should encourage and guide high-income groups to enhance their sense of social responsibility, actively participate in and set up social welfare undertakings, and it is based on the initial distribution and redistribution. We can imagine that if the initial distribution still allows enterprises to eat from the same pot as the state and employees to eat from the same pot, and egalitarianism prevails, there will be no third distribution.
Some people think that "the initial distribution depends on the market, the redistribution depends on the government, and the third distribution depends on voluntariness". This summary is concise and easy to remember, but it is also somewhat simplified. In terms of initial distribution, if the market system is relatively mature and sound, there is no big problem with the formulation of "initial distribution depends on the market" in principle. However, China has turned from a planned economy to a socialist market economy, and the market system construction, especially the factor market construction including labor, is still not perfect. For example, the urban and rural household registration system and the basic public service system closely related to it have divided the labor market, resulting in the income of nearly 300 million migrant workers being depressed for a long time. Obviously, the initial distribution of migrant workers can not be simply solved by the individual labor contract relationship such as independent employment of enterprises and independent employment of migrant workers. The deep-seated problem is how the government can further break the administrative division between urban and rural areas and accelerate the cultivation of a unified labor market. In 2020, the central government issued the Opinions on Building a More Perfect System and Mechanism for Market-oriented Allocation of Factors, proposing to deepen the reform of the household registration system, smooth the channels for settlement, "explore and promote the cumulative mutual recognition of the years of household registration in the same city in the Yangtze River Delta, Pearl River Delta and other urban agglomerations", "liberalize and relax the restrictions on urban settlement except for a few megacities, and try to register the household registration system with the habitual residence", "establish a mechanism linking basic public services such as urban education, employment and entrepreneurship, medical and health care with the permanent population,Promote the allocation of public resources according to the size of permanent residents. " Implementing the above policies and measures will greatly accelerate the process of urbanization of migrant workers and is of great significance to narrowing the income distribution gap. For another example, it is also an indispensable responsibility of the government to adjust the minimum wage guideline, strengthen the supervision of the labor market, and provide public services for employment.
"Redistribution depends on the government" is no problem in principle. Basic social security, taxation, financial transfer payment and other redistribution systems are implemented by government legislation. China has established a social security system covering the whole people, exempted agricultural taxes and reduced the burden of corporate taxes and fees during the epidemic period, increased support for poor areas such as the old and the young through financial transfer payments, and promoted the equalization of basic public services, and made great progress in secondary distribution. The problem now is that China’s redistribution system has not played a sufficient role in stabilizing the initial distribution gap. In the late 1980s and early 1990s, in view of the prevailing social background of egalitarianism, it was proposed to introduce the incentive principle of initial distribution into redistribution, which was understandable under the historical conditions at that time. After 40 years of reform and opening up, great changes have taken place in China’s social and economic life. While creating a miracle of rapid economic development, many problems have gradually accumulated, among which the gap in income distribution is very prominent. In this case, the reform of the basic social security system in the 14 th Five-Year Plan and the next period should emphasize and improve its fairness and mutual assistance. In terms of tax system, the proportion of direct taxes in China is still low, in which the highest marginal tax rate of labor remuneration is higher than the capital income tax rate. Among the direct taxes in China, the property tax, inheritance tax and gift tax, which are mainly aimed at flow income and adjust the gap of stock property, have been brewing for many years and have not been introduced. Long-term accumulation will certainly enlarge the wealth gap of residents.Therefore, during the Tenth Five-Year Plan and in the future, the focus of government redistribution should be on stabilizing the excessive gap in initial distribution.
The formulation of "three distributions depend on voluntariness" is not rigorous enough. Voluntary donation is certainly worth promoting and affirming. In 2016, China promulgated the Charity Law, which clearly stipulates that "charity activities should follow the principles of legality, voluntariness, honesty and non-profit", and "the state encourages and supports natural persons, legal persons and other organizations to practice socialist core values, carry forward the traditional virtues of the Chinese nation, and carry out charity activities according to law". The third distribution is still in its infancy in China, and there is still a big gap between the per capita donation and that of developed countries. However, the number of billionaires has surpassed that of the United States, ranking first in the world. From the international experience, if there are no taxes such as inheritance tax and gift tax, it is difficult to develop the three distributions in a standardized way only by propaganda and moral inspiration. With the platform of inheritance tax and gift tax, at the same time, giving tax incentives to charities and other social welfare undertakings, establishing institutional mechanisms conducive to the healthy development of charitable organizations and strengthening supervision and management, the three distributions can be more fully developed.
To sum up, the primary distribution focuses on mobilizing the enthusiasm of market competition at all levels of society, so that all sources that can create wealth can fully emerge. Redistribution focuses on the equalization of basic public services, correcting the "Matthew effect" of the market and laying a solid foundation for social stability and sustainable economic development. The third distribution focuses on charity and public welfare, so that the fruits of economic development can better benefit all citizens. The distribution system in these three areas should be adjusted and combined according to different stages of economic and social development. It is the basic platform to realize common prosperity to build a distribution system with different emphases and internal connections.
Guangming Daily (October 9, 2021, 02 edition)
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