China Daily Editorial Advocates Government Action on Local Minimum Wage Rates

July 3, 2006

Provincial governments in China are reluctant to review their minimum wage levels every two years, despite a Ministry of Labor and Social Security (MOLSS) provision requiring such review, according to a May 9 editorial published on the China Daily Web site. Provincial officials fear that higher minimum wages will make companies relocate manufacturing facilities to provinces where wages are lower, according to the editorial. The editorial writer adds that, since China is not ready to have market forces determine wage levels, "the central government should take the lead to ensure [that] the workers are reasonably paid." In addition, the writer advocates that the central government should develop a "more clearly defined methodology for the calculation of the minimum wage level to ensure it is not artificially low," and should also monitor compliance by local governments.

Provincial governments in China are reluctant to review their minimum wage levels every two years, despite a Ministry of Labor and Social Security (MOLSS) provision requiring such review, according to a May 9 editorial published on the China Daily Web site. Provincial officials fear that higher minimum wages will make companies relocate manufacturing facilities to provinces where wages are lower, according to the editorial. The editorial writer adds that, since China is not ready to have market forces determine wage levels, "the central government should take the lead to ensure [that] the workers are reasonably paid." In addition, the writer advocates that the central government should develop a "more clearly defined methodology for the calculation of the minimum wage level to ensure it is not artificially low," and should also monitor compliance by local governments.

The Provisions on Minimum Wages, issued by the Ministry of Labor and Social Security in January 2004, mandates a biennial review of minimum wage levels by provincial-level governments, and provides general guidance on how local governments should calculate a minimum wage, allowing for "local conditions." In July 2006, Shenzhen (not a provincial-level government) set a new minimum wage, for the most industrialized parts of the city, at 810 yuan per month (US $101), the highest minimum wage in the country. The current minimum wage set by the Gansu provincial government, 340 yuan per month (US $43), is the lowest in the country.

The Party-led All China Federation of Trade Unions (ACFTU), the only union federation permitted under Chinese law, announced its support in May 2006 for minimum wage levels to be increased by 40 to 60 percent over the next five years, according to a May 22 item in China CSR Newswire. In addition, government officials and scholars have been calling for raising minimum wage levels, according the China Daily editorial.

Senior ACFTU official Li Yonghai said that a "wealth gap" between urban elites and workers is the "main reason" for rising unrest and social instability, according to a March 8 Agence France-Presse report published in the South China Morning Post (subscription required). Li said that "China is becoming a region where wealth is being accumulated by a small number of people faster than any other place in the world." He said that this accumulation of wealth has not trickled down to the lowest level of Chinese society. "If we want to resolve this issue, then we have to adjust the overall income distribution system," Li told reporters.