Below is an interesting artcile from the Peterson Institute. I tend to agree with most of the arguments raised. Technological progress has certainly played a part (driven partically by foreign direct investment).
What Is China Doing to Its Workers?
Is the dramatic decline in labor's share of the economic pie ominous?
A silent revolution has been taking place in China. Somehow, without anyone noticing, the capitalists have upended the People's Republic. Over the past few years, they have effected a significant redistribution of income away from workers. This might well be the mother of all redistributions.
Normally, in most countries, the distribution of income between labor and capital changes not at all or very slowly. For example, in the United States, the share of the economic pie going to workers has been, with some small exceptions, roughly stable in the postwar period. In China itself, this share was roughly stable for over 25 years since the Chinese economy took an outward turn in 1978.
But recently there have been tectonic shifts. Between 2002 and 2005, according to Berkeley economists, Chong-En Bai, Chang-Tai Hsieh, and Yingyi Qian, the share of the economic output going to workers decreased by about 8 percentage points, from about 50 percent of GDP to 42 percent of GDP. Which means that China—yes, the People's Republic—now has perhaps the lowest labor share of any major country in the world.
The article concludes:
How might this decline in labor's share—a source of potential social disaffection and unrest—be reversed? To begin with, it is likely that public pressure will force the government to share the large returns to capital with savers, thereby improving household investment income. Most Chinese savers, who have their money in the Chinese banking system, today obtain zero or negative returns. And they have become wise to this large disparity. Thus, the government has been forced to list more firms in the stock market so that households can enjoy some of the high returns that companies are making. Households have also been investing heavily in the real estate market. But this government strategy has limits because stock and real estate prices are exceptionally high, and as they return to earth, households could be left with depreciated assets and poor returns, which might do little to increase their income.
Over a longer period, further economic forces will come into play. New entrants will emerge and bid away the excessive return to capital. But the big question is this: What if these forces are too weak or too slow, and the public becomes impatient? Will the decline in labor's share of the economic pie be reversed through political change? That may be China's big question.