Friday, November 27, 2009

Upwards pressure on the minimum wage

Roads of Guangzhou ChinaModern consumers in Guangzhou by Renato @ Mainland China via Flickr
Reading the news in China is an art in itself, but when the Global Times reported officials of the southern Chinese province Guangdong were thinking of raising the monthly minimum wage from its current 860 Renminbi (86 euro) to at least 1,000 Renminbi (100 euro) it was a green flag for a new phase in China's labor relations.
Already in October reports emerged about a collective bargaining system in China.
As the export industry in China started to feel the chill of the global economic crisis at the end of 2008, beginning of 2009, many of the gains made in previous years like new legislation on labor contracts and labor arbitration, were silently stalled, as were the ongoing increases of the provincial minimum wages. In 2007, 2008 prosperous provinces like Shanghai faced an increase of its minimum wages sometimes four or five times per year. Both the official increases and efforts to actually execute those raises were equally put on hold as the effect of the diminishing of China's export industry was still unclear.
But the effects were limited. Many of the migrant workers returned home and were able to pick up other jobs. Very soon, the 2007 prediction by the Chinese Academy of Social Sciences that China was heading for a shortage of labor by 2009, proved to be true. As the export industry slowly started to pick up in Southern China at the end of 2009, many of the previous migrant workers were no longer available for the low end jobs in Guangdong.
The call by Cui Renquan, director general of the Bureau of Human resources and social security in Guangzhou, the capital of Guangdong province, reflects that watershed. China might no longer be a pool of cheap labor, working under appalling conditions. Cui Renquan:
The wage policy is more than just revenue distribution; it means weeding out weak companies. Some enterprises survive by exploiting workers with low salaries and do not invest in advanced technology, thus do not further develop the industry. If policy makers adopt Cui’s proposal, these companies will have to choose between updating their technology or withdrawing from the market. Even though these companies can contribute jobs and taxes, these are not outweighed by the environmental pollution and labor disputes that result.
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