China Raises Minimum Wage

Published on Author winn

Early last month, China’s central government revealed a plan to increase the country’s minimum wage.  As noted in Hessler’s Country Driving, the minimum wage differs across the country according to variances in the cost of living (see minimum wage map).  Not only does the minimum wage differ from province to province, but it can also vary within a province along county and city lines.  For example, the Shenzhen district has a 1,500 yuan/month minimum wage while Chongqing only requires 870 yuan/month.

In an attempt to rectify wealth disparities, the government is mandating minimum wage to be 40% of the average local worker’s salary.  Beijing is also requiring state companies to give up a portion of profits in order to help fund social programs like health and education.  State Chinese governments are required to raise minimum wage levels at least every other year, which has resulted in a 12.5% minimum wage increase per year between 2006 and 2010.

While this plan sounds good on paper, Hessler has shown us how lax government officials can be when it comes to labor laws (i.e. – overlooking the bra-ring factory employing minors).  The informal relationships between local cadres and business owners encouraged by guanxi seem to make adherence to government policies the exception rather than the rule.  With these ideas in mind, I think the results these policies set to achieve will not be met.

What do you think?  Are these policies feasible?  Necessary?

Sources: China Eyes 13 Percent Rise in Minimum Wage by 2015
A Complete Guide to China’s Minimum Wage Levels by Province, City, and District
China Pledges to Narrow Income Gap

3 Responses to China Raises Minimum Wage

  1. These policies seem feasible – but not overnight. This type of an endeavor seems to me a “systematic” project that is complicated. Whether or not these policies or necessary is a little more opaque – for certain though, in my opinion, any steps that are being taken to try to even the wage gap are positive.

  2. What is the role of minimum wage legislation? One is to be a “rule”. The other is to be a “norm”. In the US we lean toward the former (laws should be written so as to be enforceable and to have “teeth” so that there’s a stick). But in many countries social legislation is either not binding (no penalties) or otherwise not designed to be a strict rule. Rather it serves to say that “if you’re a proper firm, here’s what you should do.” If advertised, it also means that employees have, if not bargaining power, at least a message that they should reasonably expect to find work that pays at least the minimum wage.

    I don’t know about Korea, but this legislation sounds very similar to that of Japan, which I suspect was modeled after that of Germany. (Even in the US, we have exceptions to the minimum for various types of jobs and employers — your waitress at Macados may rely almost entirely on tips, and since students are notoriously bad, it’s no wonder they’re surly and slow.)

  3. This idea of a minimum wage seems farcical for China given their labor rights record.

    Perhaps it is a signal, as professor said, to firms that the government expects pay raises for the common workers. From what I have read about the recent plans of the Chinese Communist Party, the government plans to have wage raises match growth in GDP. This minimum wage “guideline” will serve the purpose of encouraging a faster growth of wages.