Wage gap between the State and non-State sectors in China: a study from the perspective of the Housing Provident Fund Scheme

Abstract

ABSTRACT As an important component of China’s social security system, the housing provident fund (HPF) scheme has seen its fairness called into question. Based on the data from the China Household Finance Survey in 2017, this paper uses the least squares method and the unconditional quantile regression and decomposition method to study the wage gap between the state and non-state sectors from the perspective of the HPF. Its findings suggest that the HPF is an important component of the state-sector wage premium. That is, whether wages include the HPF affects the direction and significance of the sectoral wage gap. A closer look reveals that in the state sector, low-income workers benefit less from the HPF scheme than middle- and high-income workers. The breakdown of the wage gap within the state sector indicates that the wage premium for the middle- and high-income bracket and for the high-income bracket are mainly credited to the differences in individual characteristics of state-sector workers, while the wage premium obtained by the middle- and low-income bracket takes the form of the sectoral wage level, which benefits from the HPF system to some extent.