The monthly minimum wage will increase by about 12% in Beijing, Shanghai and Tianjin. This increase in minimum wage is part of a government push to increase domestic consumer demand, the theory being that higher wages for local workers will increase consumption spending.
“wages will increase the most in Shanghai by 12.3 percent to 1,820 yuan ($290) a month from 1,620 yuan, and 21.4 percent on an hourly basis to 17 yuan from 14 yuan, according to the report on the website www.chinanews.com.”
According to a government run website china.org.cn, the wage hikes are an annual occurrence as a part of the five year plan from 2011 to 2015.
Further Reading: http://www.reuters.com/article/2014/04/01/us-china-salary-idUSBREA3004H20140401
This increase in income certainly encourages an increase in spending, but as we have seen previously from the people of China, it could just as easily encourage an increase in savings.
As China produces more expensive products the profit margins for manufacturers will increase but due to the high number of unemployed and already cheap labor employees wouldn’t see much improvement in their wages without some government intervention. So these pushes are important as China attempts to become an upper middle income country.
I recently heard a student presentation on raising the minimum wage in America. One of his claims was that the poorer demographic is more likely to spend 1 additional dollar gained, and therefore raising the minimum wage is an effective way to incite greater consumer spending. If he is right, this should be an effective move for China.