But cutting jobs reduces labor income, increases inequality and reduces final demand.

Moreover, a new labor law and income policies will further increase workforce costs.

One key idea was to lighten the tax burden on labor . Taking into account the personal income tax and various social contributions, taxation of labor income in China is too high . To be sure, taxes are needed to finance social spending, but revenue sources other than taxes on labor income could do the job.

As a result, the income of almost 70 of the labor force cannot increase as fast as their labor productivity, and average household income thus cannot grow as fast as the economy as a whole.

The share of income going to capital has been rising, at the expense of labor.

Concurrent with diminishing labor income, government imposed ceilings on bank deposits the primary savings vehicle for most households have held down household capital income.

That, in turn, has reflected the fall in labor income as a share of the economy, owing in part to structural changes that have moved workers out of agriculture (where the labor share of income is high) and into manufacturing (where capital commands a larger share of income).

In 2008, India s female labor force participation rate averaged 35 , while low income countries averaged 58 .

But more than higher growth in income from labor will be needed to boost Chinese private consumption.

In consumer electronics, for example, low income countries became a natural location for labor intensive assembly processes.

Over time, labor intensive components of value added chains will move away from China s higher income areas.

Financial markets can be fragile, and they provide little capacity for sharing risk related to labor income, which constitutes the largest part of income in any advanced economy.

What matters for the amount of labor supplied is the after tax wage rate relative to income from wealth.

China has lots of low cost labor, but so does Bangladesh, Ethiopia, and many other populous low income countries.

Thus, the total effect of the recession on labor income of jobs, hours and wage reductions is much larger.

A sharp contraction in jobs and labor income has many negative consequences on both the economy and financial markets.

First, services growth is beginning to tap a new source of labor income generation, the mainstay of consumer demand.

As a result, total labor income the product of jobs times hours worked times average hourly wages has fallen dramatically.

Labor reform leading to longer hours would not reduce the total income of the employed, but it would reduce production costs.

Shifts in the distribution of income away from labor and toward capital, which have boosted corporate profits as a share of production.

Cheap Haitian labor has become a substitute for less skilled Dominican labor in a way that increases income inequalities, and puts a special burden on the country s public finances and services, owing to lower tax revenues.

As a result, income disparity between low end labor, on the one hand, and professionals and investors, on the other, has also increased.

Income disparities will not be fundamentally altered until the market equilibrium wage inches upwards sufficiently to create labor demand at decent wage levels.

The idea of a universal basic income, paid to all citizens, independent of their position in the labor market, is a logical next step.

Government subsidies may (temporarily) redress income disparity in a developed country where farmers account only for 2 of the labor force, or in a country in which low income groups count for only 10 of the total population.

The Ministry of Industry, Trade and Labor initiated a special program to integrate single parents into the labor market, specifically those receiving income guarantees and alimony payments, with the intention of increasing single parents' earning capabilities, while raising their employment qualifications.

Although the Government has recently reduced some of the privileges given to single parent families, the Ministry of Industry, Trade and Labor initiated a special program to integrate them into the labor market, specifically those receiving income guarantees and alimony payments.

Both are collective farms based on common ownership of resources and on pooling of labor and income in accordance with the theoretical principles of cooperative organizations.

Moreover, income and wealth inequality is rising again poorer households are at greater risk of unemployment, falling wages, or reductions in hours worked, all leading to lower labor income, whereas on Wall Street outrageous bonuses have returned with a vengeance.

The National Employment System (SINE) is an assistance network in which the actions of the Unemployment Security Program are executed, such as labor intermediation, professional training, producing information about the labor market and giving operational support to the Generation of Employment and Income Program.

As long as urbanization is coupled with job creation a strategy underscored by China s concomitant push into services led development labor income and consumer purchasing power will benefit.

Passive programs, such as unemployment insurance, income support and changes in labor legislation, allieviate the financial needs of the unemployed but are not designed to improve their employability.

While cheap labor has been a key factor in generating high growth over the past three decades, it has also contributed to profound income disparities, especially in recent years.

Agriculture remains the main source of income for more than 30 of China s labor force, compared to less than 2 in the United States or 6 in South Korea.

But China is still a very poor country, at barely one tenth the income level of the US. It has a huge reservoir of surplus labor in the countryside.

In contrast, women's participation in the labor force has increased, apparently due to the decrease in household incomes and the need to add a second income to the household.

But in China, where farmers make up 30 35 of the labor force and 70 of the population falls into low income categories, government can play only a marginal role.

Usually, this principle means that marginal tax rates should be similar at different levels of labor income, for various types of consumption, for outlays today versus tomorrow, and so on.

By focusing on job creation in services, massive urbanization, and the broadening of its social safety net, there will be a big boost to labor income and consumer purchasing power.

China s urbanization has lagged behind its industrialization, which now is around 70 when measured by the percentage of the labor force whose income is derived mainly from non farm activities.

Holes in the social safety net have led to high and rising levels of precautionary saving driving a wedge between increases in labor income and any impetus to discretionary purchasing power.

They note that construction activity is rising, home prices are declining more slowly, disposable personal income increased in the first quarter, consumer spending is up, and the labor market is improving.

Consider, next, how labor saving technological change and the integration of several hundred million new workers into global markets have affected income distribution, returns to education, and employment opportunities almost everywhere.

Indeed, if anything, weakness in the US labor market, low capital expenditures, and slow income growth have contradicted signals in the early summer that third quarter growth might be more robust.

As a developing country with US 2,500 per capita income and 35 of its labor force still in agriculture, where workers earn only about 600 per year, China s domestic problems remain enormous.