Government and Policy

No cheap labor? China increases minimum wages

By Uking Sun (chinadaily.com.cn)
Updated: 2010-07-02 21:40

At least 18 provinces, including big cities like Beijing and Shenzhen, have increased the minimum wage by an average of 20 percent from Thursday as officials hint cheap labor may no longer be considered China’s sole competitive edge.

Jiangsu province was the first to increase its minimum wage this year, ushering in the beginning of a nationwide wave that will be followed by 27 provinces and municipalities by the end of this year, the First Financial Daily reported.

Sun Qunyi, an expert with Wage Research Institute at the Ministry of Human Resources and Social Security, said this round of wage increases is compensation to low-income workers since the global economic crisis froze wages in 2009.

The share of personal income in China's gross domestic product has fallen to 39.7 percent in 2005 from 56.5 percent in 1983, statistics released by All-China Federation of Trade Unions showed. Wage increases were also far behind the economic growth.

Despite the increase, the minimum wage is still quite low compared with the average wage level. The average wage in Hainan was 2,077 yuan, but the minimum wage stood only at 630 yuan.

Amid worries that the wage increase may add to the company's operations costs and end China's status as a low-wage manufacturer, Yao Jian, a spokesman with the Ministry of Commerce, explained that China's attraction to foreign investors is not all about cheap labor force, but includes a great market and a complete industry chain.

Yao also said that the wage increase is both in accordance with the government’s efforts to adjust industrial policy and to assist more people to share the achievements of economic development.

Lu Ning, chief commentator of The Shanghai-based Oriental Morning Post, thought the wage increase will not force foreigner-owned companies to pull out China, but can help different regions in China to adjust the economic structure.

The latest round of wage increases also happened after a series of strikes for higher pay at foreign-owned factories, and an expectation of increasing income among Chinese young migrant workers.