China: Invisible Hand Not Enough to Ensure Fair Wages

Original source: Global Times

 Although China has increasingly grown rich in recent years, the distribution of wealth remains skewed. Former Chinese leader Deng Xiaoping spoke of “letting some get rich first,” but many in China are now wondering whether their time will ever come. Are recent government efforts to rebalance income distribution enough? What should be the national priorities in dealing with poverty? People’s Daily Online (PO) spoke to Su Hainan (Su), vice director of the China Association for Labor Studies, on these issues.

PO: What are the problems with the income distribution situation in China? What caused those problems? And what does the current draft of the bill on income distribution involve?

Su: There are several problems, such as relatively low incomes for ordinary people, the income gap between industries, and the wealth gap between rural and urban areas and different social groups. We can see that these problems are fundamentally caused by the irrational economic structure and our current mode of economic development as well as existing flaws in the social and economic system. Income distribution is a complicated project related to the economic structure, mode of economic development, and the economic system.

As for the salary-raising proposal of the National Development and Reform Commission (NDRC), I think the media interpretation is not accurate. NDRC’s responsibilities include drawing up income distribution reform policies and implementation advice, according to the decision of the State Council. The implementation advice includes stating reform targets, basic steps of implementation, and how to adjust income distribution.

Of course we hope to increase national income and improve people’s living standards through the reform, but I don’t consider it accurate to simply call it a policy to increase salaries.

PO: It’s also said that the goal of doubling the national average wage should be less important than providing a basic livelihood and medical care. What do you think?

Su: I think this is a biased viewpoint. Some proportion of low-income people may have only adequate food and clothing under the pressure of medical care, education and house property. But most of them have got a higher salary as well as a better life, not just an adequate one, due to the economic development. We should pay high attention to the former, raise their salaries and help them to enjoy the achievements of economic development.

PO: Where can the money come from when trying to achieving the target of pay rise? What is the government’s role during the adjustment?

Su: The money can come from two different sources. Enterprises try their best to maximize their profits during the primary distribution of wealth, while employees should act in their own interests. During secondary distribution, the government will distribute funds to local governments and other institutions. The government will make the necessary regulations, provide help to workers and strengthen supervision of companies to ensure that workers’ interests are well protected.

These rules, specifically, will cover employees’ salary payment and consultative mechanisms between workers and companies. The government will also give aid to labor-intensive industries by providing tax breaks. For instance, if a labor-intensive company has a collective wage consultation system and plans a pay rise for workers, the government will reduce taxes for the company.

Aid can also be provided by trade unions negotiating wages on behalf of workers. In addition, the government will strengthen supervision by punishing those companies who break the laws or regulations.

Workers in the local governments and other institutions will also have reasonable pay rises after their salaries are compared with that of employees elsewhere, according to the Civil Servant Law of China.

Although during the secondary distribution, the government directly allocates funds to these departments, the allocation is made on the premise of completion of wage system reform, the establishment of a collective wage consultation system and the equal growth of wages. The government will make sure that civil servants’ wages will increase in accordance with the salaries of workers in private enterprises.

PO: What do you think of the individual income tax amendment?

Su: I take a positive attitude on the amendments to the individual income tax threshold. The number of tax brackets has been cut to seven from nine, enlarging the gap between each bracket to 1,500 yuan ($230.23) from 500 yuan ($76.74). The amendments show that legislators have listened to the public voice. And I do support the democratic decision-making progress.

PO: What’s the basis of the minimum wage adjustment?

Su: There is a clear standard for adjusting minimum wage. The minimum wage law published in 2004 by the Ministry of Labor and Social Security regulates that the adjustment of minimum wage should be based on six factors – the minimum living expenses of workers and the family members they support, rising prices, local economic development and wages, personal payment of social funds, and the employment situation.

PO: It’s said that stable commodity prices and strong purchase power should come before wage increases. Do you agree?

Su: Only in part. It does enormously benefit people if a 10 percent wage increase comes after stable commodity prices and strong purchase power. However, in China’s economic development, commodity prices as well as the income level are certain to rise due to the fact that we remain a developing country.

If wages are lifted by 10 percent while commodity prices rise by 5 percent, there would still be a 5 percent gap which allows people to live a better life. But if wages increase by 8 percent or 9 percent while inflation grows by 10 percent or 11 percent, we have a problem. But I think it will not happen under the leadership of the Party and the government.

PO: Ordinary workers say that they are “overworked but paid less.” Is this fair?

Su: There are various factors. The first factor lies in people’s perspectives, which means that workers, especially ordinary workers, are not well respected in the modern society. People don’t respect ordinary workers, which is the root of the problem.

The second factor is discriminations among different occupations, for example, regular workers have a higher social position than migrant workers but lower than management or technical staff.

And the income distribution system is defective. Workers’ contributions are not rationally assessed. Above all, we should change the way people think, correct mistakes and break the boundaries of social status in order to further the income distribution system reform. That can help solve these problems.

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