Slow pay rises necessary for growth

At a news conference on friday, Xin Changxing, vice-minister of human resources and social security, said that pay rises should be slowed to keep the nation competitive. Beijing Youth Daily comments:

More pay is the common wish and eternal pursuit of all employees, but whether it can be realized depends on the economy and competition in the market.

Wages increased slowly prior to 2007, but they increased rapidly after that, due to a shortage of labor. During the low-pay years, too many entrepreneurs invested in the manufacturing and service sectors, which created overcapacity; when wages rose, the enterprises suffered from lower profits.

Under such wage pressure, some enterprises have already been moving their plants to Southeast Asia where labor costs are lower. If that trend continues, it will become a vicious cycle, since domestic economic growth will be further threatened putting more pressure on enterprises, thus making it more difficult for enterprises to increase wages. Actually, the rise in pay nationwide is already experiencing a slowdown, which is against the general expectation of many employees.

The Ministry of Human Resources and Social Security has done the right thing by lowering employees' pay expectations, but the government needs to do more as the manufacturing industry is of great importance to employment. The government needs to support the upgrading of the domestic manufacturing industry and give it a helping hand by cutting tax.