Wages in China

1. Wage Reform
2. Average Wages
3. The Wage Provisions of the Labour Law
4. The Minimum Wage
5. Wages below the minimum wage
6. Wage arrears

 
1. Wage Reform

During the era of the state-run economy, wage levels, bonuses and benefits were all set and controlled by the state.  In the mid-1980s, the government began to give state-owned enterprises (SOEs) more freedom to set their own wage levels.^[1] SOEs were allowed to use their profits retained after tax for bonuses and temporary wage rises.^[2] In the 1990s, the system was further liberalized and SOEs were allowed to establish their own internal wage structure within the confines of the overall wage budget established by the government. The 1994 Labour Law allowed SOE management to independently determine wages on the basis of productivity and profitability. From 1995, SOEs listed on the Shenzhen and Shanghai stock exchanges were allowed to set their own wages if: the growth rate of the total wage bill was lower than that of after-tax profitability; or per capita wage growth was lower than the growth rate of labour productivity (MOL, 2000). Wages could be set according to occupation and rank, as well as skill levels and productivity.  Of the then estimated 100,000 SOEs, approximately 40,000 issued shares and set wages under this system. With the massive SOE privatization programme of the late 1990s, the era of state-controlled wages effectively came to an end.^[3]

2. Average Wages

Average monthly wages have increased every year in China since the late 1980s. The average wage in urban areas in 2009 was 2,687 yuan a month, six times higher than the figure for 1995 (statistics: Average monthly wage in urban areas 1978-2007).  However, as wage levels increased, so did discrepancies between different sectors, types of ownership and regions. In general, average monthly wages were higher in share-holding, foreign-owned and state-owned enterprises, and were lowest in locally funded enterprises, with wages in enterprises owned by Hong Kong and Taiwanese businesses in the middle (statistics: Average monthly wages by types of ownership 2006-2007).

A more significant gap emerged between different occupations and industrial sectors, and especially between low-skilled and highly-skilled workers (statistics: Monthly average wages by sector 2006-2007). In 2009, the average monthly wage of those employed in primary industries was only 1,196 yuan, less than a quarter of the average wage of those working in financial services (5,033 yuan), and the computer services industries (4,846 yuan).

The gap between urban and rural incomes also grew. A report from the Chinese Academy of Social Sciences indicated that in 1978 urban income was 2.57 times that of rural income, but by 2005, that gap had expanded to 3.22 times, and in 2006 to 3.27 times. In 2006, the annual per capita disposable income of urban households was 11,759 yuan compared with only 3,587 yuan in rural households. Taking into account the fact that rural residents effectively have no social security or welfare benefits, the urban-rural income gap in real terms was probably six-fold.^[4] In early 2011, official statistics indicated that the annual per capita disposable income of urban households had increased to 17,175 yuan, while rural household income had increased to just 5,153 yuan.

The income discrepancy between rural and urban has been the main cause in the surge of migrant labour over the last two decades. It is estimated that there are about 230 rural migrant workers in China. Around 153 million moved to cities outside their home county, where very many suffer from routine and institutionalized discrimination.

3. The Wage Provisions of the Labour Law

The 1994 Labour Law established for the first time a minimum wage system in China. Article 48 states that the minimum wage is designed to ensure that the lowest wage earned by a worker is still sufficient to support their daily needs. In addition, the Labour Law specifies the form of payment, maximum hours and the rates for overtime to protect workers from exploitation. Under the Labour Law:

The standard workweek is 40 hours and overtime shall not exceed three hours a day or 36 hours per month (Article 41). Overtime pay should not be less than 150 percent of an employee’s wage during normal work days; 200 percent on rest days, and 300 percent on national holidays, such as the Lunar New Year (Article 44).

Wages shall be paid to the workers themselves in legal tender and on a monthly basis. The deduction of wages or delay in payment of wages is strictly prohibited (Article 50).
An employer shall pay wages according to law to workers during their statutory holidays and during marriage or funeral leave (Article 51).

4. The Minimum Wage

In 2003, in an attempt to strengthen the protection offered to workers by the minimum wage, the Ministry of Labour and Social Security (MOLSS) issued its Provisions on the Minimum Wage. They state that, when determining the monthly minimum wage, provincial governments should take into consideration factors such as the cost of basic necessities for employees and their dependents, as well as the local consumer price index. (See minimum hourly rate; minimum monthly wages). MOLSS stressed that enterprises, especially those that were a making profit should pay workers more than the minimum wage. The provisions clearly state that the minimum wage should apply to all forms of ownership, enterprises, and employers, including private non-enterprise entities, individual industrial and commercial households with employees and the labourers who have formed a labour relationship with them (Article 2). It also clarifies that the minimum wage is for work within normal working hours, and should not include overtime payment. When wages are paid on a piece-rate basis, the provisions state that workers should receive payment not less than the minimum wage for a normal working month.  In addition, employees should also be entitled to paid annual vacation, home leave, marriage or funeral leave, maternity and contraceptive leave, and these all should considered as normal labour.

The provisions recommend that local and regional minimum wages should be set at about 40 to 60 percent of average monthly wages. In reality, the minimum wage in most provinces is below or barely reaches the recommended level of 40 percent (statistics: Proportion of minimum wages of monthly average wages 2006).  In major cities, such as Beijing and Shanghai, the new minimum wage in 2010 was less than 20 per cent of the average monthly wage. The gap between the average monthly wage and minimum wage in Beijing was 4,513 yuan.

Although the minimum wage has been raised many times since 1994, any benefit accrued by low- skilled workers has been wiped out by inflation. Between 1994 and 2004, the average income of civil servants in Dongguan municipality increased by as much as 340 percent, from around 8,000 yuan to more than 35,000 yuan per annum. But during the same period, the average annual income of workers employed in the city’s clothing and leather manufacturing enterprises remained within the general range of 6,000 to 10,000 yuan. Average wages in the leather and shoe industry increased (mainly during 2003-04) by a total of 71 percent over the decade, while those in the apparel industry rose on average by only 28 percent. In other words, the increase in civil servants’ salaries between 1994 and 2004 was around five times and ten time those of the leather and shoe workers and the clothing workers respectively. Taking inflation into account, migrant workers’ income in Dongguan remained more or less static in real terms.^[6]

The life of workers got worse in 2007 when inflation accelerated even further. In October 2007, the consumer price index rose to an 11-year high of 6.9 percent, with the basic food prices increasing by 18.2 percent year on year.^[7] In July 2007, the price of a catty (about a pound) of pork in Guangdong had increased to 13.6 yuan,^[8] while the minimum wage in the province remained between 450 and 780 yuan.^[9]

Although the government urged employers to pay higher than the minimum wage, many low-skilled workers only received the minimum wage for a 40-hour working week.^[10] In order to earn sufficient money, many migrant workers in Dongguan had to extend their working hours to 12 to 14 hours a day, seven days a week, and with only one day off a month.  These workers worked between 84 to 98 hours a week on a regular basis, so that overtime accounted for between 30 to 50 percent of their final monthly pay packets.^[11] Despite their hard work, a report issued by the Guangdong Federation of Trade Unions in January 2005, showed that more than three quarters of rural migrant workers employed in the province still only earned less than 1,000 yuan per month, compared with the 1,997 yuan average monthly salary in Guangdong of that year.^[12]

In response to the global economic crisis, in November 2008, the central government in Beijing ordered the minimum wage to be frozen until further notice. The freeze lasted until February 2010, when the relatively developed and prosperous province of Jiangsu announced a 12 percent increase in its minimum wage. By the end of 2010, just about every province and municipality in China had increased its monthly minimum wage by an average of 23 percent. Several jurisdictions increased the minimum wage once again in 2011, signalling a move towards annual adjustments rather than increases every two years as had been the practice before. Beijing’s municipal government actually increased the city’s monthly minimum wage twice within the space of six months to reach 1,160 yuan on 1 January 2011 – at the time the highest rate in the country. Guangdong then increased its minimum wage on 1 March, with the monthly rate in the provincial capital Guangzhou rising to 1,300 yuan, and Shenzhen increased its rate to 1,320 yuan a month later

5. Wages below the minimum wage

Despite the legal protection the MOLSS Provisions on the Minimum Wage are supposed to provide, many workers receive less than the minimum wage. According to the Guangdong Labour and Social Security Bureau, many employers deduct costs for accommodation and meals from employee’s wages. In some cases more than 300 yuan was deducted from a wage of less than 700 yuan. In other cases, employers would make payment of the minimum wage contingent on employees fulfilling a wide range of onerous requirements, such as never taking any time off. Workers paid on a piece-rate basis often had to work day and night in order to earn wages that could still be lower than the minimum wage level.^[13]

Conditions were even worse for temporary workers and those who had not signed labour contracts. Workers could be subject to arbitrary fines and punishment with little means of redress. As a result many workers resorted to extreme actions, for example, a man attempted suicide after he was fined about a quarter of his 400 yuan wage.^[14] The Labour Contract Law that came into effect in January 2008 attempted to address these problems. It specified that the wage of part time and hourly based work should not be lower than the minimum wage level, and that workers who had not signed a labour contract should also be covered by the law.

However, two years after the implementation of the Labour Contract Law, many migrant workers were still paid less than the minimum wage. For example, a survey by the Hainan provincial trade union in August 2010 showed that one sixth of migrant workers in Hainan earned less than 500 yuan a month, far below the legal minimum wage of between 680 yuan a month and 830 yuan a month. The majority (55 percent) of the 350 workers surveyed by the union earned between 500 yuan and 1,000 yuan a month. Only five percent could earn more than 2,000 yuan a month. Not surprisingly, 90 percent of the respondents said they were not satisfied with their current level of income.

6. Wage arrears

An even more serious problem than the excessively low wages paid to workers is the frequent and extended delay in payment of wages. According to a MOLSS spokesman, the total wages in arrears bill across China from 2005 to July 2007 reached 66 billion yuan. ^[15] The problem of wages in arrears is especially serious for construction workers, for example, in one construction project alone, the wages in arrears amounted to about 3.3 million yuan.^[16] Factory management often use delayed payment as a means of holding on to workers who might otherwise leave (see A Long and Winding Road: Two families devastated; see also the MOLSS report: On the Problem of Wage and Labour Protection: A Research Report on Migrant Workers No. 4, in Chinese).

Feeling desperate, some workers used extreme methods to address their grievances, such as self-harm and attempted suicide. Many resulted in deaths.^[17] Even if they survived their suicide attempts, they might face legal prosecution for violating the peace.^[18] Workers determined to get their wages back, have been beaten up by their employers and their thugs. For example, on 16 October 2005, 46 rural migrant worker representatives were beaten up by a number of men armed with steel pipes.  Five workers were driven to a river, resulting in one death, one missing and numerous injuries.^[19] In January 2008, a subsidiary of a major state owned company - the China State Construction Engineering Corporation in Nanjing, hired a group of men armed with knives and steel rods to attack workers’ representatives. One migrant worker who attempted to mediate in this matter had his arm chopped off.^[20]

And in late May 2011, Xiong Hanjiang, a 19-year-old migrant worker from Sichuan visited his township labour bureau in the hope that officials there would help him get his two-month’s salary back from his employer, Hua Yi Porcelain. The bureau did in fact order the factory to give Xiong his 3,400 yuan salary but the boss refused to pay. When Xiong and his parents demanded payment, the boss and his family started to beat them and Xiong’s hamstrings were severed, leaving him possibly paralyzed for the rest of his life.

Following the assault, Xiong’s relatives pleaded with the township government in Guxiang and municipal government in Chaozhou to arrest the boss and give Xiong proper compensation. Sadly, neither government paid any attention to their plight. Frustrated and angry, the family, together with hundreds of other Sichuan migrant workers, vented their fury by smashing cars in the town.

As CLB's research report: Speaking out: The Workers’ Movement in China 2005-2006  shows, wages in arrears were by far the most important source of conflict between labour and management in the private sector in the mid-2000s. For example, between January and September 2005, the Guangzhou Municipal Labour and Social Security Bureau accepted and handled a total of 36,408 complaints of non-payment of wages. The bureau’s director was quoted by the media as saying that over 95 percent of all labour protests occurred because of companies owing wages to employees.^[21]

To assist migrant workers in obtaining their due wages, labour advocates and non-government organizations have started to provide legal advice to workers and even represent them in court. This has substantially increased the number of labour dispute lawsuits from only 28,285 in 1995 to 114,997 in 2004.^[22] Once disputes have been accepted by the courts, the chances of workers’ winning has been very high. In Ningbo in Zheiang province and Zhongshan in Guangdong, for example, workers have won more than 90 percent of the labour dispute cases handled by the courts.^[23] Threatened by this development, some employers have hired thugs to assault citizen’s agents or lawyers who helped workers pursue their legal rights. For example, in November 2007, a labour rights advocate, Huang Qingnan who provided legal advices to migrant workers, was attacked by two men outside his office in Longgang, Shenzhen.  Huang suffered serious injuries to his back and legs.  This was only one in a succession of attacks targeting at labour advocates in the Pearl River Delta.^[24]  Even if workers won their cases, few could get more than the wages in arrears. According to a Beijing-based legal aid centre for migrant workers, about 56.5 percent of employers refused to carry out the verdicts of the courts or the arbitration committees. Only 47 percent of workers received compensation equivalent to or more than their owed wages.[25]

A fair part of this analysis relies on data published by the National Bureau of Statistics. Although this official data remains an important source for macroscopic study, its inherent weaknesses should not be overlooked. A major weakness of the official wage statistics is that it ignores a large part of China’s economy – employment in rural areas and in private enterprises. Analyses based on official data at best provide a partial picture and indicate only general economic trends. To aid further understanding of the issues, CLB has translated and edited a discussion on the limitations of the use of official wage data, entitled Let’s Resolve any Doubts about the “Double-Digit Growth in Wages,” available as a PDF.

1. Yueh, L. Y. (2004). Wage reforms in China during the 1990s. Asian Economic Journal 18 (2): 149-164.[Top]
2. Groves, T., Y. Hong, J. McMillan and B. Naughton, 1995, China’s Evolving Managerial Market. Journal of Political Economy, 103, pp. 873–92.[Top]
3. Yueh, L. Y. (2004). Wage reforms in China during the 1990s. Asian Economic Journal 18 (2): 149-164.[Top]
4. Zhu Qingfang, “經濟社會和諧發展指標體系綜合評價” [A Comprehensive Target System Evaluation of Harmonious Development in an Economic Society], in Tuo Xin, Lu Xueyi, Li Peilin, eds., 2007 年中國社會形勢分析與預測 (2007: An Analysis and Forecast of Trends in Chinese Society), 社會科學文獻出版社(China Social Sciences Press), Beijing, 2006, pp. 321-339. Quoted in CLB report: Speaking Out: Workers’ Movement in China 2005-2006 p.9, available at here.[Top]
5. “勞動力低廉”之危　中國勞動力價值與國強民富” (Crisis of ‘Low-cost Labour-power’ - The value of labour-power in China and the [goal of] national strength and prosperity), 中國經濟周刊 (China Economic Weekly), 30 May 2005; available at here.[Top]
6. CLB report: Falling Through the Floor: Migrant Women Workers’ Quest for Decent Work in Dongguan, published in September 2006; available at here.[Top]
7. Richard McGregor, “China Inflation at New High”, published on 12 Dec. 2007 on FTChinese.COM; available at here.[Top]
8.  “廣東省物價局長稱豬肉價格將持續上漲” [The Price Bureau of Guangdong Province warns of continued increase in the price of pork], published in Nanfang Metro News on 12 July 2007; available here.[Top]
9. “廣東將上調最低工資標準，增幅約在10%左右” [Guangdong plans to adjust upward the minimum wage in the end of 2007 by about 10%], published in Guangzhou Daily on 13 Nov. 2007; available here).[Top]
10. CLB report: Falling Through the Floor: Migrant Women Workers’ Quest for Decent Work in Dongguan, published in September 2006; available here.[Top]
11. CLB report: Falling Through the Floor: Migrant Women Workers’ Quest for Decent Work in Dongguan, published in September 2006; available here.[Top]
12. CLB report: Falling Through the Floor: Migrant Women Workers’ Quest for Decent Work in Dongguan, published in September 2006; available here.[Top]
13.  “廣東最低工資新方案出爐　標準將超北京上海“ [The latest adjustment of minimum wage in Guangdong would exceed the standards in Beijing and Shanghai], Renmin Wang, 13 July 2006.)[Top]
14. CLB report: Falling Through the Floor: Migrant Women Workers’ Quest for Decent Work in Dongguan, published in September 2006; available here; “資低不堪重負　一男子跳樓自殺卻奇跡生還” [A man pressurized by low wages survived from attempted suicide by jumping from a height], published in Zhongguo Xinwenwang on 27 Dec. 2007; available here.[Top]
15. “今年中國失業率4%　創五年新低” [China’s unemployment rate dropped to a five year’s low at 4% this year], published in China Review on 23 Oct. 2007; available here.[Top]
16.  "300萬元欠薪暴露工程承包’潛規則’” [The 3 million wage in arrears has exposed the ‘latent rules’ of the subcontract system of construction industry], published on Economic Daily on 25 Jan. 2008; available at Renmin Wang.[Top]
17. “資低不堪重負　一男子跳樓自殺卻奇跡生還” [A man pressurized by low wages survived from attempted suicide by jumping from a height], published in Zhongguo Xinwen Wang on 27 Dec. 2007; available here; “河北包工頭討薪未果自殺” [A subcontractor committed suicide after he failed to got unpaid wage from the contractor], published in Dajiang Wang on 22 July 2007; available here.[Top]
18. “以自殺相威脅爬塔吊要工資被處以5日拘留” [A worker who threatened to commit suicide as a way to obtain arrears wage was put in custody for five days], published in Shangdong Xinwen Wang on 11 May 2007; available here.[Top]
19.  “廣西兩記者採訪拖欠農民工工資事件被歐打” [Two reporters covering a case of delayed payment of rural workers in Guangxi were beaten up], published in Xinhua Wang on 9 Feb. 2007, available here; “2005年博羅欠薪民工被砍事件” [The chopping incident of delayed wage of rural migrant workers in Bolou in 2005], Wikipedia.)[Top]
20. “中國評論﹕封殺企業 難禁欠薪” [Comment on China: Black listing enterprises would not eradicate unpaid wages] , published on Xinlang Wang on 24 Jan. 2008, available here; “川籍民工南京討薪遭砍手　細說原委感謝家鄉人” [A Sichuan migrant worker whose arm was chopped off in a delayed wage dispute tell his story and thank his fellow villagemen for care], published on Sichuan News.[Top]
21. Ting Yun, “廣州向全國人大建議刑事制裁惡意欠薪者” [Guangzhou Suggests National People’s Congress Punish Malicious Wage Withholders], published on China’s Election and Governance on 16 Nov. 2005, quoted in CLB report: Speaking Out: The Workers’ Movement in China 2005-2006, p. 20.[Top]
22. Shen, J. (2007). Labour Disputes and their Resolution in China.  Oxford, England: Chandos Publishing.[Top]
23. Shen, J. (2007). Labour Disputes and their Resolution in China.  Oxford, England: Chandos Publishing.[Top]
24. “珠三角勞工維權人士連續遭暴徒襲擊” [Succession of Pearl River Delta labour rights advocates attacked by thugs], published on Citizens’ Rights and Livelihood Watch on 21 Nov. 2007, available here.[Top]
25. 農民工欠薪案件研究報 (A research report on wage in arrears problem of migrant workers), available here.[Top]