China is transforming into a society where there is a sharper awareness of inequality. To assess social stability, it is necessary to focus on qualitative changes rather than surface-level events, such as the number of demonstrations.
Since 2010, the Chinese government has been trying to substantially raise the minimum wage level.
In 2010, 29 provinces, cities and autonomous regions raised their minimum wage levels by an average of 24.1 percent, according to Xinhua News Agency. In 2011, 21 provinces, cities and autonomous regions had raised their minimum wage levels by an average of 21.7 percent as of the end of September.
The Ministry of Human Resources and Social Security hopes to see the minimum wage level raised by an annual average of more than 13 percent over the next five years.
In any case, these increases are well above the consumer price index increase rate and can be seen as measures to realize the targets of the 12th Five-year Plan. Section 2 of Chapter 6 of the plan pointed out the need to “promote equal pay for equal employment between migrant workers and urban residents and increase wage levels of migrant workers.”
There is no doubt that increasing the minimum wage level will increase the quality of life of the “nongmingong” migrant workers. However, there has been no indication that raising the minimum wage level has led to a decrease in the number of strikes.
As far as can be seen from Chinese domestic news media, it appears that strikes for demanding higher wages and disputes over wage payments in arrears are increasing as businesses suffer from the global economic deceleration.
Not all of these problems have to do with wages, but the number of so-called mass incidents, the equivalent of demonstrations, was 180,000 in 2010, three times as many as 10 years ago.
The labor-intensive export industry is finding its competitive power damaged by rising costs for labor and raw materials. In particular, small and medium-sized enterprises and micro-businesses are finding their cash-flow situation deteriorating as credit gets tighter and their businesses are suffering.
In 2011, the value of exports increased 20.3 percent year on year, well down from 31.3 percent the previous year.
In addition to higher minimum wage levels, raw materials costs have increased in line with rising crude oil prices. If economic stagnation in Europe and the United States continues over an extended period, the possibility cannot be denied that strikes occur frequently and restrictions on news reporting are introduced, which is what happened in 2010.
The deterioration of the business environment is not the only thing that has led to an increase in demonstrations. It appears that migrant workers, who make up the lowest tier of the urban labor market, are developing a changing awareness of inequality and that Chinese society is becoming one in which there is a sharper awareness of wealth disparity.
One reason is that not all laborers are receiving the benefits of a higher minimum wage level. While migrant workers’ wages are higher than the minimum wage level, published statistics cannot be taken at face value because there is a large “sample selection bias” in the wages survey of migrant workers in the informal sector.
A sample survey conducted among farming families in Qingchuan in Sichuan province, from which many migrant workers come, found that the monthly wages of 10 percent of migrant workers were lower than 500 yuan, and the wages of 28 percent were between 500 and 800 yuan.
Therefore, many migrant workers were earning below the 650-yuan minimum wage in the province or the 869-yuan minimum wage of Guangdong province, the top destination for migrant workers.
This is because about half of migrant workers find jobs with the “non-public” sector of private enterprises and independent business operators, which belong to the informal sector.
According to the 2nd Economic Census, private enterprises and independent business operators had an average of just 25.7 and 2.9 employees, respectively. Almost all of these are family businesses, so there is little prospect of minimum wage levels being applied.
Another reason is the fact that the wage increase rate for “danwei” (work unit) employees is much higher than the minimum wage. The danwei refers to the “public” sector of state-owned and collective enterprises, which belong to the formal sector, and almost all employees within the sector are city residence holders.
The wages of danwei workers are fairly high, and there is a significant discrepancy in their wage growth rate and the minimum wage. In the years ahead, even if the minimum wage level is raised by around 13 percent per annum, danwei workers’ wages are expected to grow at an even faster pace, so there is little prospect that the income disparity will contract.
A third reason is that any increases in the minimum wage level are canceled out by the rise in commodity prices.
In November, the prices of meat and poultry and their products increased a high 19.6 percent from a year earlier, pushing up the prices of overall food products 8.1 percent.
Since China’s income disparities are so wide, reactions to commodity prices differ depending on the income level group. The Engel co-efficients of the first quintile, which corresponds to the bottom 20 percent of income earners, are 45.5 percent in cities and 47.0 percent in rural areas, which are fairly high compared with those of the fifth quintile, 30.0 percent and 34.8 percent, respectively.
Therefore, the standards of living of those in the lowest income groups will not improve much by an increase in the minimum wage level.
A survey of migrant workers carried out in 2010 found that there has been a generational change among migrant workers, and the “new generation of migrant workers,” born after the 1980s, account for 58.4 percent of the total.
In comparison with previous generations, they are more highly educated and, while they aspire to open their own businesses in the cities someday, their wages are low for the work that they do, and they see themselves as “nongmin” farmers, rather than citizens of a city. Thus, it is clear there are many contradictions within the group itself.
Asked to choose groups they compare with to judge their own current standard of living, 23.6 percent of migrant workers cited other migrant workers living in the same city, followed by city residence holders (23.4 percent) and farmers living in their home communities (19.3 percent).
According to the National Bureau of Statistics, which carried out the survey, a higher percentage of the new generation migrant workers compare themselves with city residence holders than in the previous generations.
The migrant workers, who make up the lowest level of the urban labor market, are expected to feel a sharper awareness of wealth disparity, rather than becoming less sensitive to it.
In June 2011, local farmers reacted angrily when security authorities ordered the removal of a woman stallholder in Xintang town in Guangzhou. The incident developed into a large demonstration.
Although demonstrations are not a rare occurrence in China, they have tended to involve issues such as ethnic autonomy, compulsory land purchase and pollution, and have been limited to specific areas or groups with a strong sense of belonging.
Demonstrations by a loosely connected group, such as migrant workers, have been rare. The Guangzhou government took the unusual step of offering city residency to anyone providing information about people involved in the rioting. This indicates how wary the city government is of migrant workers organizing themselves.
Strikes in demand of higher wages are a business risk for any company. However, workers in the informal sector cannot strike easily, and frequent strikes in that sector do not necessarily indicate social destabilization.
To assess the risk of social destabilization, it will be important to keep an eye not on the number of strikes but on qualitative changes, such as the degree of communality between the latent size of the parent population of the demonstrations and their awareness of wealth disparity, as well as changes in the business environment of the informal sector.
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Yuji Miura is a senior economist at the economics department of the Japan Research Institute.
This report was published in the February 2012 edition of Asia Monthly, an English-language publication of the institute, and was edited by The Asahi Shimbun. The original report is available at (http://www.jri.co.jp/MediaLibrary/file/english/periodical/asia/2012/02/contents.pdf).
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