The Chinese government is rapidly changing its workers’ salary policies through radical practices. The Ministry of Human Resources and the Social Security has already proposed a new scheme to the State Council, which will most probably be approved by the end of this year. This reform represents a major shift in China’s socio-political structure.
For one, each province will be forced to run its salary policies in accordance to the state’s guidelines. A minimum wage will be established, which excludes bonus and overtime revenues. National norms like these eradicate the conventional ones where the formal increase of salaries was disproportionate to employees’ effective working hours.
In addition, the proposal puts a limit on government or managers’ compensation of SOEs. They, differently from private industry managers, accumulate fringe benefits, like free housing and expensive schools for their children. As a result, their income appears subtly multiplied.
Finally, the reform would also lessen the gap between wage variations and general price indexes. This policy guarantees that workers receive adequate salary increase in proportion to inflation. The automatic mechanism is copied, but not counterfeited, by the European welfare experience.
Repercussions brought by China’s initial – and successful – phase of massive growth of income is now scrutinized. The future may bring a point of concern, as well as an opportunity for appropriate income redistribution. Both perspectives are valid.
On one hand, the country’s political leaders have not succeeded in mitigating local workers’ uproars who, in recent months, have protested mainly against multinational companies. But, the government did not take a punitive approach towards migrant workers who bear unsafe working conditions and low standards of living. Their demonstrations could be seen as a threat to China’s integrity, as they convey how a country’s flaws can lead to social instability.
At the same time, the issue of disproportionate compensation could be played as a positive card in light of China’s socio-economic development. Labor-intensive investments are no longer encouraged in the country’s coastal areas. Multinational companies that seek to delocalize, must bring innovative technology, or move inland in order to avoid further migration.
Today, China is mature enough to select its incoming investments. Higher salaries implicate higher domestic consumption. In light of the weak global recovery from the financial crisis, it would be risky to insist on China’s role as the international manufacturer.
Instead, it would be wiser to allow for increasing domestic purchasing power. This is why strikes are not interrupted abruptly, but regulated through treaties and peaceful negotiations. China’s prelude to wider affluence is giving way to its merging of equality and development.