The unreason of income distribution system mainly includes the influence of non-market factors on market factors in the initial distribution, and weak compensatory intervention of the government in redistribution of initial distribution.
As the increasingly expanding income gap is setting barriers for Chinese social development, the central government requires“strengthening the reforms on national income distribution system”. The new round of reform on income distribution system should cut to the quick, and really works.
According to the data from National Bureau of Statistics, the Gini coefficient of China has kept on rising since 2000 when it topped 0.4, the warning limit. And now it comes to 0.47, according to the World Bank. Companied with the expanding income gap is the rapid concentration of social wealth, which is contrary to the target of building a moderately prosperous society in all aspects, demonstrating the urgency of adjusting income distribution system.
The unreason in income distribution system since marketization reform mainly shows in influences of non-market factors on market factors in the initial distribution, and insufficient compensatory intervention of the central government in redistribution of initial distribution results. First is the gray income out of combination of market mechanism and non-market factors. “Gray income” means interference of nonmarket forces on market mechanism, which can lead to concentration of incomes that should be equally distributed by market mechanism to hands controlling non-market forces. In addition, gray income is not included in social and economic statistics. Overall, gray income in China includes incomes from double-track price system, monopoly, loss of state-owned assets, tax erosion and illegal operation, etc.
Second, the weak position of laborers causes that the labors now are having a declining income proportion. In this long-term oversupply labor market in China, “monopsony”objectively exists, and this situation is even worse in traditional labor-intensive industries. Enterprises often force employees to accept a wage offer that can hardly meet the basic demands, to make the largest profits. This results in a situation that labors can not equally share achievements in economic growth.
Third, state-owned monopoly industries can offer much higher wages. In the process of state-owned enterprise reform, this problem is not solved.
Fourth, the social security system hasn’t sufficient relieving capabilities in redistribution. As a relieving system for the government to intervene in income distribution by market mechanism, social security system should not only have functions to correct the unbalances in initial distribution by market mechanism, but also capabilities to relieve the social contradictions due to income gap. In the process of marketization reform, meaning through the transformation from “enterprise-funded security” to social security, the unbalanced social security coverage due to different income levels between urban and rural area and different enterprises still exists. According to the statistics of 2009, only 4.8% of rural population in China takes pensions, and the ratio of urban population is 78%. After several times of adjustments, now urban enterprise retiree has a basic annuity of 1200 RMB/month, but still less than 50% of that of a civil servant. This is contrary to the aim of social security system to remedy the groups with weak market competitiveness and “losers”, and may even worsen the unbalanced income distribution by expanding the actual income gap.
The above four “spots” are the targets for current reform on income distribution system.
First, make comprehensive efforts on gray income, meaning overcoming the income gap due to grey or even“black” income, which needs great determination from decision-makers. Cleaning gray income needs comprehensive measures, and the priority is to reference on experiences from other countries of market economy, especially those with mature market economy, to patch the loopholes in financial, administrative, state-owned resources management systems that may lead to losses of public capital, corruption and so on, while establish a standardized and transparent systems, cut unnecessary administrative examination and approval procedure, reduce administrative monopoly, standardize governmental authority, perfect strict social monitoring mechanism.
Second, actively and steadily boost collective labor contract negotiation mechanism, and raise labor income.

The main reason for laborers having a declining income proportion is that a single laborer is weak facing an enterprise in labor market, while collective agreement negotiation can arm labors and effectively protect their economic interests. The existing legal framework in China has provided a legal basis for boosting the collective negotiation. From the perspective of economics, collective negotiation can ease the buyer monopolization in labor market, and maximize social welfare by market competition. It is demonstrated that collective negotiation can be a legal way to secure labors’ economic interests and avoid social contradictions, as a smoother to social contradictions.
Third, average the higher incomes in monopolized industries, to overcome the income gap between industries, especially with monopolized industries. This is a key part for reform on income distribution system in China. The following measures can be taken. For example, carry out state-owned capital management budget, turn in the equity earnings and profits of monopolized enterprises to state treasury to supplement social security, impose special taxes to monopoly profits, hold public hearings before any price changes of products and services from monopoly industries, make transparent of income distribution in administrative monopoly industries, etc. Taking chance of this wave of reform on income distribution system, treat anti-monopoly as a necessity for socialist market economy construction, and only in this way can we secure a balanced income distribution.
M e a n -while, the social security system should focus on those disadvantaged, to prevent intergenerational transmission of poverty. As China has a large population and unbalanced economic development between urban and rural areas and different regions, it is hard to realize equal social security coverage in a short term. So, we should vigorously promote the construction of rural social security system and the establishment of urban social security system for migrant workers, while consider setting up educational funds in social security system for low-income, especially rural poor population, to improve labor quality and competitiveness, therefore preventing intergenerational transmission of poverty.