Updated by Prisoner666 June 2019
For the last 30 years, one of China’s primary economic advantages has been the product of a demographic dividend brought about by high birth rates 1960’s and 1970’s. This birth rate ensured China embarked on its program of economic reform at a time that was demographically very favorable. In 1980 the average age was 20 years old and average wages remained pennies on the dollar compared to equivalent US wages until well into the 21st Century and a fraction of many other competitors. For the most part China has managed to maintain these low wage levels through a number of institutional measures.
One such factor is by restricting the bargaining power of labor. The State affiliated All China Federation of Trade Unions is a largely ineffectual body, which often sides with employers. Added to this, the household registration system, or Hukou, restricts the rights of migrant workers by denying them social service provision in the cities in which they work. This ensures, to a large degree, that migrant workers remain migrant workers and are usually recycled back to their place of residence.
Despite this lack of recourse to bargaining rights, industrial disputes have broken out in recent years leading to pay rises in numerous sectors. As China population ages, a consequence of the one-child policy, pressure on employers is likely to raise eroding China’s competitive edge.
For many years, the way in which China calculated its wage data was a legacy of the Communist-era command economy and represented only a small, disproportionate portion of the workforce at large. Under the old system where most workers were State sector, a system based on survey SOEs and local government offices made sense. But as China modernized the system became laughably antiquated – reporting major pay rises in the wake of the financial crisis as millions were laid off or faced salary cuts.
By discounting the wages of migrant workers and failing to account for the non-salary benefits of SOE jobs, like grossly expansive expanse accounts and kickbacks, hopelessly skewed the wage data. This massively understated white-collar salaries and overstated blue-collar jobs.
In order to redress this imbalance, the NBS has extended their survey to include wages for urban private enterprises, but still fails to account for migrant workers that make up around 275 million workers. However independent estimates of migrant worker wages put the figure somewhere around 1500 USD a year, as of 2013. This relative stagnation is confirmed by the China Academy of Social Sciences that outlined in a recent report that wages as a percentage of GDP have fallen almost consistently for the last 25 years.
Despite the fact the data displays a woefully inadequate picture of the Chinese economy at large, it does present data for comparison by region and the disparity between urban and rural incomes.
A true assessment of China’s wages would illustrate how difficult the task rebalancing the Chinese economy through boosting domestic consumption will really be.