Op-Ed Contributors
Low-wage era not over yet
By Qin Xiaoying (China Daily)
Updated: 2010-07-08 08:03
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Abundant supply of cheap labor and uneven regional growth graphs mean workers' rights need to be defended
The State Council recently urged relevant departments to step up efforts aimed at raising the minimum wages of the nation's ordinary workers.
This was the latest move to change the status quo - of workers' pay being lower than that of government employees, especially those working for State-run monopolies.
The Cabinet's move coincided with a flood of media reports that highlighted staff shortages at plants in Shanghai, Guangzhou, Shenzhen, and other coastal regions.
This intensive media scrutiny, along with the decisions by Foxconn and Honda to significantly raise the minimum wages of their mainland staff, has led some to believe that the era of cheap labor has come to an end in China.
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Is this really the case?
The country's massive number of ordinary workers, who often work for next to nothing, has contributed to the fast growth of the economy over the past decades.
Given that the share of total wages as a proportion of China's GDP has been falling, the country's average wage levels have also dipped considerably.
Some complex factors, ranging from the influence of a planned economy to defects in China's legal safeguards for workers and insufficient understanding by employees of their rights and interests, are at the heart of such a situation.
Some have attempted to answer this question from the perspective of corporate ethics and responsibilities.
Yet, all these factors will only partly explain the reasons for low wages in the country.
The law of the market tells us that the price of labor - or wages - is mainly determined by the demand-supply ratio.
Wages will decline once labor supply exceeds market demand and increase in case of the opposite.