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Minimum wage set to increase in cities across China

Following the lead of Jiangsu, which announced a 12 percent increase in the minimum wage this month, several other municipalities have indicated they too will raise the minimum wage this year.

The cities of Beijing, Shanghai, Chongqing, Guangzhou and Dongguan have all separately indicated that the time is now right for an increase in the minimum wage, frozen by central government order on 17 November 2008 in the wake of the global economic crisis.

With the revitalization of the domestic economy last year, and reported labour shortages in some areas, the calls for wage levels to be improved have been coming in, “wave after wave,” China Economic Net reported yesterday.

It pointed out that cities like Shenzhen were struggling to offer a competitive wage for migrant workers and new graduates, especially now that more and more employment opportunities were opening up in rural areas that have traditionally exported migrant workers. The cost of living in these areas is much lower than in the big cities, and as such they can offer lower wages and still be competitive, it said.

Another significant factor behind the calls for higher wages was the sudden jump in prices at the end of last year. China’s Consumer Price Index climbed 1.9 percent year on year in December, fuelled mainly by food and rent increases, items that disproportionably affect the lowest paid workers. Prices in China had remained stable or even fallen during much of 2009, but started to rise again in November, increasing that month by 0.6 percent year on year.

Many local governments will undoubtedly bow to the inevitable and raise the minimum wage this year. The key however will be whether or not they have the determination to enforce those new wage standards when local enterprises start complaining, as they already are in some places, that increased wage costs will make their businesses uncompetitive.