Deepening urban-rural income divide may endanger China's social stability and threaten sustainable development

Foxconn and Honda's recent decisions to raise the wages of employees at their plants in Shenzhen and Foshan, respectively, have drawn wide attention and coverage from foreign media.

Some have hailed the wage hikes as the coming of a new era for Chinese laborers while others have claimed that the move marks another workers' revolution in the Asian nation.

However, the foreign media have shown more interest in the process leading to the pay hikes rather than the hikes themselves, or to put it another way, the settlement path of the labor-capital dispute in these two joint ventures.

Worker strikes and negotiations between grieving employees and bosses have been very common in many foreign countries. The reason why the Foxconn and Honda strikes have received such a high degree of attention from the media is that such labor-capital disputes have rarely been witnessed in mainland factories.

The fact that more than a dozen young Foxconn employees in Shenzhen committed suicide at the plant in such a short period of time has shocked the Chinese public.

This, together with strikes by workers in Honda's assembly lines in South China, will prompt the Chinese government and the public to reflect on the social pressures behind ordinary workers' demand for wage rises.

In response to the incidents, or coincidentally, the State Council, the country's Cabinet, has reportedly drafted a series of policies and measures that seek to raise laborers' wages. These are due to come into force very soon.

At the same time, a document that aims to cap the highest pay in some long-controversial monopolistic industries and sectors is also under way.

The People's Daily and the Xinhua News Agency have recently published a series of opinion pieces, warning of the widening wealth gap between the rich and poor in China and putting forward their views to solve the problem.

In a serious tone, these commentaries have pointed out that the yawning income divide between urban and rural areas has become so serious as to endanger the country's social stability and sustainable development.

The People's Daily and Xinhua New Agency warnings are indications that the central government has acknowledged the urgency of hiking the pay of middle and low-income groups, increasing people's property incomes, building an all-inclusive social security and welfare network across the country and narrowing the income gap between various groups.

It is true that an increase in ordinary employees' pay by a large margin will work in calming grievances about low wages and help to avoid strikes.

However, the dozen suicides at Foxconn's Shenzhen unit and several work boycotts at Honda's assembly lines have also exposed some deep-rooted problems in Chinese society, which is now in transition.

High attention and effective precautionary measures are badly needed to prevent any similar conflicts from ending tragically.

The wide income gap between urban and rural areas and among different social groups, especially in the context of a rapid economic growth, is one of the underlying factors behind the emerging imbalance and social instability.

Largely coming from impoverished rural areas in neighboring provinces, many of these young Chinese employees, either in Foxconn or Honda, have been under huge psychological pressure due to the wide economic gap between the booming city and their less-developed homelands.

A reluctance to return to their hometowns, coupled with their own shabby living in these lavish cities, may have bewildered many of these employees.

The prolonged mental stress, ineffectively ventilated, may have led them to take extreme measures.

After three decades of high-paced development since the reform and opening-up, the low-cost labor advantage China enjoyed has now begun to subside.

Quantity-focused trade has been the main driver of China's galloping economic machine. The low production cost, which has been mainly attributed to China's cheap labor, has given its products a sharp edge in world markets. However, the global financial tsunami has prompted the export-based economy to shift its focus to expanding domestic demand.

At the same time, the country has realized the urgency of taking effective measures to increase technological content in its exports and push for the much-needed industrial upgrade.

The shift in the country's economic focus, which makes it necessary for domestic enterprises to employ and cultivate highly educated and skilled workers, will inevitably result in an increase in their labor cost.

In the context of a widespread economic growth, any attempt by employers to keep employee wages low to maximize profits will likely fuel labor disputes.

Having grown up in a market economy, China's younger generation has yet to cultivate a long-term and healthy outlook to life. Cell phones, computers, TVs and automobiles are being regarded as indispensable to living.

Under these circumstances, any setback or failure to satisfy their demands will be deemed as failing in life, which will possibly cause them to take extreme steps.

Despite its rapid economic development over the past decades, China is facing many latent social contradictions and problems not seen previously.

Hopefully, the recent issues at Foxconn and Honda will open the government's eyes to these and similar conflicts in society.

The author is a researcher with China Foundation for International and Strategic Studies.

(China Daily 06/11/2010 page8)