The Ministry of Labor and Social Security drafted a salary
regulation last week that is to be submitted to the State Council
soon.
Although the details of the regulation are still not available,
the authorities have offered enough information for us to
understand the regulation as a way to raise the salaries of common
workers, ensure their incomes grow at a reasonable rate and
eliminate unfairness in income distribution.
However, it will be difficult to achieve such fine goals without
offering workers more substantial leverage against their
employers.
In a sound economy, salaries should more or less be in harmony
with the rate of economic growth. In other words, the lives of
common people should improve as the economy grows.
If the average standard of living improves much slower than the
economy grows, it could soon lead to a lopsided economic structure:
Wealth is distributed in an unfair manner, domestic demand
stagnates and recessions loom.
Such a scenario took place in the United States in the 1920s and
in Latin America in the 1980s.
Things in China are not that bad, but we cannot afford ignoring
the potential anymore.
According to research by Wen Yueran, a labor scholar with Renmin
University of China, the proportion of labor costs in China's GDP
dropped by 12 percentage points between 1990 and 2005. The decrease
was almost the same as the concurrent decline in the share of
people's bank deposits compared with overall deposits.
Such changes suggest that common laborers are not the primary
beneficiaries of economic development. This fact is also behind the
sluggish domestic demand, the economy's unreasonable structure and
the non-performing pricing mechanism of the market.
Given this situation, it is virtually impossible to expect the
market to permit salary increases to match economic development
while preventing the potential threat to the sound economics posed
by the huge difference.
The market is not capable of doing so because resources are
allocated not just by the "invisible hand" of the market, but in
partial response to the influence of administrative power. This
pattern can only be corrected by administrative power itself.
Moreover, the groups that have enjoyed the advantages of unfair
resource allocations will try their best to maintain the status quo
by objecting to fair competition. Only the government has the
strength to confront their efforts.
A practical analysis of the low salary environment also suggests
the market is incapable of helping put more money into workers'
pockets.
The abundant supply of labor in the market is the first element
putting workers in a disadvantaged position when it comes time to
negotiate salaries. The current laws and regulations do not grant
them a way that is both simple and economical to push for more
money.
The fact that high-ranking officials, even the country's
premier, are working to help migrant workers get delayed wages is
solid proof that workers have to go to extraordinary lengths to get
their just pay.
The new salary code has many antecedents. There have been
several legal documents governing labor issues, including the Labor
Law. Most of them have clauses about regular salary rises, but few
of them have succeeded in establishing an effective mechanism to
guarantee that the raises are actually granted.
Despite such stipulations, many employers choose to simply
ignore things like minimum wages. But such violations usually go
unpunished unless the government steps in.
Qiu Xiaoping, a senior official with the Ministry of Labor and
Social Security pointed out recently that the ministry had been
working on raising the salaries of common workers. And labor
departments at all levels have urged local governments to increase
their minimum wages. But these efforts have not hit home
either.
So as laws go only partially enforced, administrative bodies
should realize their central role in protecting the interests of
labor instead of assuming the market will do the job.
And even as administrative bodies struggle to help workers and
better distribute wealth, other policies seem to work against their
efforts.
The best example in this regard is the favorable treatment
enjoyed by monopoly players. The wide gap between the incomes of
common workers and the employees of monopoly players is the result
of such favorable treatment.
Several lawmakers have stressed that it is improper to "force
companies to raise salaries" in a market economy. They are
obviously concerned that such compulsory legal stipulations might
hurt the efficiency of the country's fledgling market economy.
But if the law and administrative bodies protect the interests
of people who already enjoy considerable advantages instead of the
rights of all people, or if they attach more weight to the
efficiency of monopoly players than the fairness of the market,
they are actually doing their own damage to the market economy.
The authorities have every reason to revise the law to give more
leverage to common workers and to link wages to the consumer price
index. This would allow the country's market economy to develop on
a more sound basis.
The author is a commentator on finance and economics based in
Shanghai
(China Daily January 28, 2008)