Income inequality and labour supply among low-income workers: evidence from China

This paper examines the relationship between income inequality and labour supply in China, with particular attention to low-income workers. Using China Family Panel Studies data for 2010–2020 and a fixed effects model, we assess associations with labour force participation and working hours. A one-percentage-point increase in the provincial Gini coefficient is associated with a 0.20-hour reduction in weekly working hours among low-income workers, compared with 0.13 hours among high-income workers. Evidence for labour force participation is limited, aside from a weak positive association among high-income individuals. Among low-income workers, the negative association is especially pronounced among self-employed, younger, highly skilled, and female workers. Results from the mechanism analyses are consistent with three potential channels: lower perceived opportunity fairness, weaker beliefs in social mobility, and a reorientation of cultural values away from material ambition. The moderation analysis further indicates that this negative association is stronger among low-income workers who perceive healthcare and social security problems as more severe, whereas perceived employment, education, and housing problems do not significantly moderate the relationship. These findings highlight the roles of psychological perceptions and cultural values in understanding how income inequality is related to labour supply among economically vulnerable workers.