Wall Street Journal: As China’s Economy Slows, So Too Does Growth in Workers’ Wages

China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher.

17 December 2014

Growth in minimum-wage levels across China appeared to have slowed this year, amid low inflation rates and a slowdown in the world’s second-largest economy, a labor watchdog says.

Just 20 of the 32 Chinese provinces and regions tracked by China Labor Bulletin raised their statutory minimum wages so far in 2014, fewer than the 27 areas that lifted base pay levels last year, according to report published Tuesday by the Hong Kong-based group.

The latest data also marked a third-straight year of decelerating minimum-wage growth, according to China Labour Bulletin.

In 2014, the 20 regions that have boosted their minimum wages did so by an average of 13%, lower than the average 17% seen last year. This also compared to an average increase of 20% by 25 regions in 2012, and the average 22% increase by 24 regions in the preceding year.

The slowdown in minimum-wage growth “is partly explained by China’s low inflation rate over the last year,” China Labour Bulletin said. Government data showed China’s consumer prices rose in November at their slowest pace in five years amid lower global commodity prices and weaker demand.

Increases in minimum wages, however, don’t necessarily translate to better pay for many workers.  A slowdown in China’s economy and its manufacturing sector, combined with a lengthy squeeze on credit, means that “many low-paid workers have seen next to no increase in take-home pay this year,” China Labour Bulletin said.

The watchdog’s findings appear to dovetail with a study issued this week by a top Chinese think tank, which called time on the era of rapid wage growth in China, even as concerns fester over the country’s weakening labor-cost competitiveness.

Based on its assessment of China’s economy, corporate earnings, minimum-wage levels and labor supply, the Chinese Academy of Social Sciences believes that the country’s wage levels, for a period of time, “won’t grow by the large extent seen in previous years,” according to a Monday report by the state-run China News Service.

Even so, wage growth over the past decade has already all but eroded China’s competitive edge in labor costs over many of its regional rivals, according to the academy.

In particular, average wages in China’s manufacturing sector now exceed comparable levels in South and Southeast Asia by as much as six times, the think tank said.

— Chun Han Wong. Follow him on Twitter @ByChunHan

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