February 22, 2012, by China Policy Institute
Minimum Wage Rise in China: what does it mean?
As the long period of traditional Chinese New Year break has just ended, it may be a tentative time for many global supply chain factories in coastal areas of China due to the poor return rate of old workers and difficulty in finding new workers. Claims about a shortage of migrant workers, however, is not a new phenomenon but has been around since the mid-2000s.
Reflecting a change in the labour market situation, we have nonetheless witnessed a significant growth in the minimum wage (MW), a means used by local authorities to protect the interests of low income workers in urban areas. Such indicator is typically applied to rural migrant workers. For instance, Shenzhen, a leading city in MW across China, has increased the MW from 1100 yuan/month in 2010 and 1320 yuan/month in 2011 to 1500 yuan/month in 2012, a rise of 36% within three years. Beyond Shenzhen, all local (Provincial or Municipal) governments have in fact announced their plans to adjust the MW. As a result, on average, there has been a rise of over 20% compared with last year.
The rise of the MW in recent years may be interpreted from different angles with different meanings. In one way, it is an indicator of the end of a “cheap labour” strategy in China, reflecting the change of labour market conditions and also the attitude of the Chinese government to the relationship between labour and capital. In another way, it may represent a turning point in the improvement of working conditions and economic returns to the new generation of Chinese migrant workers, who are no longer willing to put up with the conditions their parents accepted in the past. Whilst the rise of the MW is indeed good news for the public and in particular those who have been concerned with poor working conditions for migrant workers in China, the impact of the MW rise cannot be over-interpreted due to following reasons.
Firstly, there is no evidence concerning a reduction in the gap between the MW and the average wage of local urban employees, a key indicator measuring income inequality in urban China. In fact, it is a frequent occurrence that the former is only 20% to 30% of the latter in China, a far cry from the 40% to 60% of the international community.
Secondly, according to sources from the Ministry of Human Resources and Social Security, it is the norm that the MW is not strictly complied with in practice and many employers treat the MW as a “wage level” which migrant workers won’t reach in working hours unless substantial over-time is put in. In this regard, the MW may be used as an indicator for actual earnings of migrant workers in which overtime work is included.
Finally, it seems that the function of the MW as a designed policy instrument is rather limited or exists in name only unless the voices and needs of migrant workers can be heard, respected and taken into account in the various stages from policy making to implementation in factories. Alongside an enhancement in government intervention and inspection, we call for participation for and empowerment of migrant workers in dealing with the various challenges in adjustment of the relationship between capital and workers, and also between migrant workers and local communities in the near future.
Dr Bin Wu is Senior Research Fellow at CPI, University of Nottingham.
Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.