The biggest potential for increasing farmers' income lies in institutional fairness

In 2013, nationwide farmers' income growth achieved a "tenth consecutive year of rapid growth," taking another solid step toward accomplishing the goal of doubling income set by the 18th National Congress of the Communist Party of China. But the problem of an excessively large urban-rural income gap has still not been reversed, the problem of income imbalance within rural areas is becoming increasingly prominent, and a long-term mechanism for increasing farmers' income has not yet been established. Looking at the channels for increasing farmers' income in the future, the room for growth in household business income is becoming more and more limited, the growth rate of wage income is continuously declining, and property income and transfer income have the greatest growth potential. At the present stage, to achieve rapid growth in farmers' income, efforts must be made in institutional innovation to thoroughly eliminate the problem of institutional unfairness under the urban-rural dual structure.

The "four major gaps" in the farmers' income problem

Since 2004, farmers' income has broken free from a prolonged period of stagnation. The per capita net income of farmers rose from 2,622 yuan in 2003 to 8,896 yuan in 2013, with an average annual real growth rate of 8.9%, far exceeding the average annual growth rate of 4.7% over the previous ten years. But behind this, the problem of imbalanced income distribution masked by averages has become increasingly prominent.

First, the absolute gap between urban and rural residents' income continues to widen. The absolute gap between urban and rural residents' income rose from 6,486 yuan in 2004 to 18,059 yuan in 2013, repeatedly hitting new highs. The more economically underdeveloped the place, the larger the urban-rural income gap. In 2013, the ratios of urban to rural residents' income in Beijing and Shanghai were 2.20 and 2.28 respectively, while in Gansu and Guizhou they were as high as 3.71 and 3.80 respectively. In 2013, the nationwide per capita disposable income of urban residents was 3.03 times the per capita net income of farmers. If per capita disposable income were used for comparison in both cases, the relative gap between urban and rural residents' income would be even larger.

Second, the income gap between regions is gradually widening. In recent years, the absolute gap between underdeveloped regions and developed regions has continued to widen. In 2004, the relative gap in per capita net income of farmers between the highest, Shanghai, and the lowest, Gansu, was 4.17 times, with an absolute gap of 6,268 yuan; in 2013, although the relative gap between the two dropped to 3.76 times, the absolute gap widened to 14,100 yuan.

⟦NL> Third, the income gap within rural areas is becoming increasingly obvious. With the deepening of rural market-oriented reform and the deepening of the division of labor and specialization among farmers, the income gap among farmers is also gradually widening. In 2013, 60% of farming households had incomes that did not reach the national average, and the per capita net income of the 20% low-income farming households was only about 12% that of the 20% high-income farming households. The Gini coefficient of per capita net income of rural residents has generally shown an upward trend since 2000, reaching 0.3857 in 2013, an increase of 0.0321 over 2000, approaching the warning line of 0.4.

Fourth, the income gap among farmers across sectors is becoming increasingly prominent. From the changing trends in major income sources in recent years, agriculture's contribution to farmers' income growth has continued to decline, while wage income's contribution to farmers' income growth has risen relatively quickly. From 2004 to 2013, the proportion of agricultural income in farmers' per capita net income continuously declined from 47.6% to 31.8%, and its contribution rate to income growth fell from 64.4% to 10.8%; the proportion of wage income in farmers' per capita net income rose from 34.0% to 45.2%, and its contribution rate to income growth rose from 25.5% to 58.9%. The problem of increasing income for farmers engaged in farming, especially grain-growing farmers, will become increasingly prominent.

Affected by factors such as resource endowments, development opportunities, and individual capabilities, the existence of a certain income gap is normal, but if the income gap is too large, especially if it continues to widen over the long term, then great attention must be paid to it. China's farmers' income has been far lower than that of urban residents for more than 30 consecutive years, which is rare in the world. At present, China's per capita GDP has reached 6,700 US dollars, entering the ranks of middle-income countries, but the Gini coefficient has also reached 0.473, far above the warning line of 0.4. To successfully cross the "middle-income trap," more attention should be paid to the fairness of development, and the opportunity should be seized to promote farmers' income growth and narrow the urban-rural income gap.

Analysis of the potential for increasing farmers' income

Since the reform and opening up, the channels for increasing farmers' income have gradually diversified, which has provided a more solid foundation for promoting farmers' income growth. In the new stage, with changes in external environmental conditions, the income-increasing effects of different channels have also changed greatly, and the pattern of farmers' income growth has reached an important juncture for proactive adjustment.

The room for growth in household business income has narrowed. In 2013, the proportion of farmers' household business net income had already fallen to 42.6%, of which primary industry income accounted for 3/4. Agricultural income plays a decisive role in the growth of household business income, while agriculture's contribution to farmers' income growth has tended to weaken. The price increases of agricultural products in the market will still remain limited, and the effect of price increases on farmers' income growth will also tend to weaken.

The growth of wage income is subject to many constraints in the short term. At present, China's potential economic growth rate has been lowered, and steady growth has gradually become the norm. In recent years, the economic growth rate has steadily declined, falling below double digits starting in 2011, and standing at 7.8% and 7.7% in 2012 and 2013 respectively. The monthly average income growth rate of migrant workers working away from home also fell from around 20% in 2010 and 2011 to below 14% in the past two years. Optimistically estimated, in the period ahead the growth rate can be maintained at around 10%, a substantial decline from the previous level.

There is great room for growth in transfer income and property income. Since 2004, the state has intensively introduced policies to strengthen agriculture, benefit farmers, and enrich farmers, and a series of subsidy and assistance policies with high value have been put into effect. Both the absolute amount of transfer income received by farmers and its proportion in farmers' per capita net income have increased relatively quickly, becoming a major highlight of farmers' income growth. At the same time, with the continuous deepening of rural reform, farmers' land, housing, and other property have become more involved in income distribution, rural community cooperation and shareholding cooperation have developed rapidly, compensation standards for land expropriation have gradually risen, and farmers' property income has grown very quickly. In some developed areas, farmers' property income accounts for more than 1/3.

Structural change is an important result of economic development, and structural adjustment is an important means of promoting development. The change in the structure of farmers' income is the result of China's transformation from an agricultural country to an industrial country, fully reflecting the process of economic marketization and policy emphasis on agriculture. In the future, the government's role should mainly be brought into play to accelerate institutional innovation, optimize the economic structure and fiscal expenditure structure, allow farmers to participate more equally in economic development, allow public finance to cover rural areas more broadly, and continuously guide and support the upgrading of the structure of farmers' income.