Inadequate wage growth

0 CommentsPrint E-mail China Daily, May 13, 2010
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For nearly two thirds of the time during the past three decades, when China saw nearly double-digit economic growth, the share of gross domestic product that went into paying wages unfortunately kept falling.

It was already no secret when a trade union official recently pointed out that the proportion of labor income had plunged by 20 percentage points between 1983 and 2005 to account for about one third of the economy.

As the country's Gini coefficient, a key measurement of inequality of wealth, has reportedly broken the international warning level of 0.4 to reach 0.47, it is imperative that Chinese policymakers pull out all stops to increase workers' payment quickly enough to help narrow the wealth gap.

Seven provinces have raised their minimum wage standards by more than 10 percent in the first quarter of this year, and another 20 provinces have planned to follow suit later this year.

Such government-led hikes of minimum wage standards are surely badly needed. In the absence of such government intervention, most enterprises would simply try to keep payment for workers absurdly low to maximize their profits.

Nevertheless, ongoing government efforts - to arrest this dangerous decline of labor income as a proportion of the national economy - are still insufficient given corporate profits and tax revenues are rising even more rapidly.

In the first quarter of this year, China's urban residents saw an increase of 9.7 percent in their wages while rural residents saw incomes grow by 16.3 percent.

That sort of wage growth looks impressive, but not when compared to the country's tax revenue, which rocketed by 33.2 percent year on year in the first four months, and industrial enterprises' profits, which doubled in the first three months.

Clearly, the cause behind the widening wealth gap in China is not that people's wages do not increase at all.

It is the comparatively and dangerously slow pace of wage growth against the surge seen in corporate profits and tax revenues that have tilted the wealth distribution towards tipping point.

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