The Economist - USA (2019-12-21)

54 TheEconomistDecember 21st 2019

1

X

iang jinguoworks as a security guard

in the industrial city of Shijiazhuang,

300km (185 miles) south-west of Beijing.

He has long been living on just 1,700 yuan

($237) a month. He grumbles about the ris-

ing cost of food, especially the soaring

price of pork. “I’ve become an unwilling ve-

getarian,” he huffs. Happily for him, how-

ever, the monthly minimum wage in his

city was raised to 1,900 yuan on November

1st, up from 1,650 yuan. “Now I can try go-

ing back to my normal diet,” he says.

Minimum wages have long been a fea-

ture of most advanced democracies. Amer-

ica introduced a national minimum wage

in 1938. Japan did so in 1959. China caught

up in 1995 when it revised its labour law to

require local governments to set a wage

floor. The central government stressed the

“importance and urgency” of this as a way

of “protecting workers’ rights”.

In recent years, however, the mood has

changed. Despite the rising cost of living,

Mr Xiang had to endure a three-and-a-half

year gap between adjustments of the mini-

mum wage in Shijiazhuang. The law used

to say that local governments must revise

them every two years. In 2015 this was ex-

tended to three years, but the authorities in

Shijiazhuang still dawdled. Provincial gov-

ernments set different floors for each city

within their jurisdiction based on such fac-

tors as the local cost of living and unem-

ployment rates. In 2019 just eight provinces

raised minimum wages, down from 15 the

year before. In 2010 all but one of China’s 31

provinces raised them.

To ensure that firms do not squeal, offi-

cials have tried to keep minimum wages

low. Most employers observe them—a

good indication that they are not too oner-

ous. Yanan Li of Beijing Normal University

estimates that only about 5-10% of Chinese

workers earn less than the minimum, a

smaller proportion than in most develop-

ing countries that have such a system. By

taking an average of the highest minimum

wages in each province, Jing Wang of York

University in Canada has calculated a no-

tional national minimum wage. She finds

that the ratio of the minimum wage to the

average wage has fallen sharply since 1995

(see chart), from 40% to just 26% in 2018. In

the oecd,minimum wages were 42% of av-

erage wages in 2018, up from 35% in 2000.

The central government appears to

want localities to use changes in the mini-

mum wage as a way of indicating how

much they would like wages in general to

rise. Since China’s economic growth began

slowing early in the 2010s, provinces have

parted company in their enthusiasm for

raising the level. Inland spots such as He-

bei, which are poorer than coastal areas,

want to compete using their abundant

cheap labour. The manpower-rich south-

western region of Chongqing, where

growth slowed from 11% in 2016 to 6% in

2018, waited until the last day of the three-

year window before modestly increasing

its minimum wages in January 2019.

Richer areas with a shortage of labour

have gone the other way. Shanghai, for in-

stance, has raised its minimum wage every

year since 2010. It now has China’s highest

monthly wage floor, at 2,480 yuan. That is a

Workers’ pay

Keeping caps out of hands

SHIJIAZHUANG

China once stressed the importance of a minimum wage for protecting workers’

rights. Some officials have grown lukewarm about it

China

55 Politicalvlogging

56 Chaguan: Seeking legitimacy

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