A COMPARATIVE APPROXIMATION INTO CHINA'S LIVNG – WAGE GAP


Álvaro J. de Regil

Some recent studies argue that, due to demographic trends, this economy may be about to reach the turning point when its pool of surplus labour would start declining, which would make real wages rise. The number of cases of labour strikes and other forms of pressure that have resulted in dramatic wage increases are apparently mounting. But this is still too early to tell and it is strictly based on traditional market logic. On the contrary, if China eventually runs short of workers, market logic –Darwinian as it is– would make multinationals leave China to better labour exploitation heavens, where the political-business oligarchies would be more than happy to let corporations exploit their citizens in exchange for a share of the profits. This Darwinian logic imposes a tremendous downward pressure on the quality of life of many societies in the developing world, for governments have bet their sustainability in power on customary centre-periphery relationships. The result is a rather dire situation for the vast majority of the population in these societies. Neoliberal globalisation has globalised consumer markets, prices and access to labour pools, but wages, deliberately, have not been globalised. In this sense, the extremely low level of China’s wages is a perfect strategic element used by corporations to maintain strong pressure on the manufacturing wages of other economies that compete with China. This is the political economy milieu explaining the labour endowments of Chinese workers.

Given the importance of China as a major global player, the TLWNSI project has been seeking, for several years, reliable data that can enable it to assess the state of real wages in China and their gap with a living wage. TLWNSI regularly uses as its main source for its analytical work the annual reports published by the Bureau of Labour Statistics (BLS) of the U.S. Department of Labour. Lett and Bannister –the authors of the BLS’ reports on China– argue that albeit these data are not as reliable as those for the most developed economies, the accumulated evidence to date, including China’s First National Economic Census..., supports the general validity of the BLS’ annual calculations on China’s manufacturing employment and labour compensation. In this way, TLWNSI now deems it appropriate to prepare its first comparative report of hourly compensation costs in China’s manufacturing sector vis-à-vis selected countries. Form TLWNSI's living wage concept perspective, this work assesses the dimension of the gap between the real wage and the living wage. Subsequently, two projections into the future of China’s manufacturing sector wages are performed. The first projection is based on the growth experienced during the five-year period of this study (2002-2006). This will allow us to prospect how long it would take to close the living-wage gap –at the average nominal wage growth rate of 9,2%– under certain assumed conditions. The second projection explores the average growth rate of Chinese real wages, in the manufacturing sector, required to close the gap in thirty years –TLWNSI’s standard to close wide wage gaps– under certain assumed conditions.

Parting from TLWNSI’s living wage concept, the two projections in this assessment expose, comparatively, the dramatic gap that currently exists between the real wages paid, on average, to all manufacturing employees in China and the nominal wages that would constitute a living wage in real terms. This gap is dramatically wider than those prevalent in the two largest East Asia economies of Japan and South Korea, and still quite wide than those in some of the so-called emerging markets in other regions, such as Brazil and Mexico. Moreover, the likelihood that China’s future economic policy will integrate a reasonable long-term plan of thirty years to achieve labour endowments of a living wage condition is currently unrealistic. Although, in the last few years, Chinese real wages have been appreciating, China’s role as the largest supplier of cheap labour –under modern slave conditions– in the global capitalist system’s international division of labour, does not show any signs of any significant abatement. China’s development policies are still anchored on offering the traditional centre-periphery comparative advantages, namely cheap labour. Thus, the weight of China’s huge labour pool will continue to exert strong downward pressure on the wages of other developing economies that are dependent on centre-periphery relationships.

Brief prepared in June 2010. For a full review of this brief, click here or on the picture to download the pdf file.