The story appears on

Page A7

October 31, 2014

GET this page in PDF

Free for subscribers

View shopping cart

Related News

Home » Opinion » Chinese Views

Expert concerns over ‘growing’ wages arouse popular ire, need reality check

AN IRRITATING monthly routine for many Chinese employees is to open a sealed pay slip, glance at the numbers, squeeze it into a ball, or tear it into pieces — depending on your mood — and chuck it into the bin.

Many have quipped that at a time when the price of nearly everything is rising, the only thing that stays stagnant is their salaries. Popular complaints are given an outlet in vulgar jokes, such as “one cannot look at a pay slip without regretting opening it or fuming that it is useless, too thin to be even improvised as toilet paper.”

Crassness aside, the joke illustrates the widespread frustrations with wage levels in China, which many believe haven’t risen with the general economic tide. One man, however, openly questioned the prevalent public perception and earned himself a great deal of criticism.

Cai Fang, deputy head of the Chinese Academy of Social Sciences, dropped a bombshell with a statement he made during a radio talk show on October 20. “Excessively rapid growth of salaries would hurt the economy,” said the prominent economist and demographer. This remark backfired badly.

Cai was immediately cursed online for airing views that are “completely out of touch with reality.”

This, to many of his detractors, is yet another example of a discrepancy between an elite professor’s perceived inflammatory viewpoints and popular feelings, of his insensitivity to commoners’ plight, or worse, of scholars identifying with capitalists and businessmen while further estranging themselves from the masses.

Like all rebukes directed at public figures, the criticism heaped on Cai is somewhat hyperbolic, and thus not totally justified. On the face of it, his argument isn’t entirely wrong. Steep growth of salaries does have a crippling effect on the economy, by raising labor costs for businesses. This is indeed a law of economic common sense.

Out of context

But even this law cannot be taken at face value. It cannot be invoked without any regard of the differences between the country of its origin and China, where complex economic circumstances often defy Western theories and necessitate discretion. This is exactly the mistake Cai made — invoking an economic theory out of context. In a country where hundreds of millions of migrant workers — the mainstay of the labor force — are frequently owed back pay and left high and dry by runaway bosses, it’s absurd to envision a scenario of “overly rapid wage growth,” which doesn’t exist, or won’t materialize anytime soon.

In fact, the across-the-board wage levels in China haven’t progressed in tandem with the economy. According to a report recently issued by the Chinese Academy of Labor and Social Security, a government think tank, Chinese wage-earners’ income hasn’t grown at a pace commensurate with GDP growth. In terms of average annual income, Chinese employees’ salaries leaped from 1,120 yuan (US$187) in 1985 to 34,905 yuan in 2012, a thirty-fold increase. In the meantime, GDP per capita soared from 857 yuan to 29,991 yuan, a jump of almost 34 times. Impressive progress, but when we compare these two ratios, 30 with 34, it’s clear that relative to GDP growth, wage levels have been barely able to catch up.

Several years ago, I wrote a piece for Shanghai Daily about the dwindling proportion of wages in overall Chinese incomes, lamenting the fact that honest work is nowadays less valued than speculation, capital gains and other fast ways of acquiring wealth.

Sound analysis

This trend remains entrenched. While Professor Cai didn’t bother with the number game, reliant solely on empirical knowledge or command of economic theories, some of his peers appear to be exercising more academic rigor in contemplating an issue that merits sound statistical analysis.

An extensive research led by a team headed by Tsinghua Professor Bai Chong’en has found that the percentage of wages as a share of GDP declined by 7 percent from 1995 to 2007.

Although concerns about a dramatically slowing Chinese economy may presumably be behind Cai’s opposition to “steep wage increases,” the battle to save the 7.5 percent growth target — widely considered necessary for healthy employment and social stability — cannot be won simply by keeping workers’ salaries low. Besides, doing so would be against the mandate that China is to transform itself into an economy less driven by manufacturing.

And an equally important point needs to be made. When the nominal wage growth is adjusted for inflation, real growth may well drop to or below zero.

After all, any serious discussion of wage levels ought to take into account such significant indicators as inflation, food prices, home prices and so on — a simple analytical framework professor Cai seemed to lose sight of. Barring its current economic woes, China’s underpaid workers deserve a higher reward for their contribution to powering the world’s second-largest economy.

The immediately effective way to make life easier for businesses, as many argue, is for governments to reduce the tax burden, because social insurance payments and a variety of taxes could amount to 70 or 80 percent of their expenditures, according to a report published by the online edition of People’s Daily on October 21.

Alas, some of our wisest economists are missing the point, obsessed instead with a take on wages, the wrong scapegoat.




 

Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.

沪公网安备 31010602000204号

Email this to your friend