Employment Structure Change and Wage Inequality in Urban China

Using data from China’s Urban Household Survey（UHS） 1992—2009 and National Population Census, we documented the change of employment structure in urban China since 1990, studied the changing pattern for different types of labors, and investigated the impact of the employment structure change on wage inequality. We find “upgrading” trend in employment structure change in urban China, with low-skilled jobs contracting, middle and high skilled jobs expanding. In addition, the wage of low-skilled jobs increased slower than the wage of higher skilled jobs. Despite the significant change in employment structure, the impact of the change of employment structure on the change of total wage difference is minor. The change in the job distribution only contributes 1% to the increase in overall wage variance. The increase in wage inequality is mainly driven by the increase in within-group residual inequality and the change in return to observable variables, such as education, regions, and jobs.