Expert concerns over 'growing' wages need reality check

In fact, the across-the-board wage levels in China haven’t progressed in tandem with the economy. According to a report recently issued by the Chinese Academy of Labor and Social Security, a government think tank, Chinese wage-earners’ income hasn’t grown at a pace commensurate with GDP growth. In terms of average annual income, Chinese employees’ salaries leaped from 1,120 yuan (US$187) in 1985 to 34,905 yuan in 2012, a thirty-fold increase. In the meantime, GDP per capita soared from 857 yuan to 29,991 yuan, a jump of almost 34 times. Impressive progress, but when we compare these two ratios, 30 with 34, it’s clear that relative to GDP growth, wage levels have been barely able to catch up.

Several years ago, I wrote a piece for Shanghai Daily about the dwindling proportion of wages in overall Chinese incomes, lamenting the fact that honest work is nowadays less valued than speculation, capital gains and other fast ways of acquiring wealth.

Sound analysis

This trend remains entrenched. While Professor Cai didn’t bother with the number game, reliant solely on empirical knowledge or command of economic theories, some of his peers appear to be exercising more academic rigor in contemplating an issue that merits sound statistical analysis.

An extensive research led by a team headed by Tsinghua Professor Bai Chong’en has found that the percentage of wages as a share of GDP declined by 7 percent from 1995 to 2007.

Although concerns about a dramatically slowing Chinese economy may presumably be behind Cai’s opposition to “steep wage increases,” the battle to save the 7.5 percent growth target — widely considered necessary for healthy employment and social stability — cannot be won simply by keeping workers’ salaries low. Besides, doing so would be against the mandate that China is to transform itself into an economy less driven by manufacturing.

And an equally important point needs to be made. When the nominal wage growth is adjusted for inflation, real growth may well drop to or below zero.

After all, any serious discussion of wage levels ought to take into account such significant indicators as inflation, food prices, home prices and so on — a simple analytical framework professor Cai seemed to lose sight of. Barring its current economic woes, China’s underpaid workers deserve a higher reward for their contribution to powering the world’s second-largest economy.

The immediately effective way to make life easier for businesses, as many argue, is for governments to reduce the tax burden, because social insurance payments and a variety of taxes could amount to 70 or 80 percent of their expenditures, according to a report published by the online edition of People’s Daily on October 21.

Alas, some of our wisest economists are missing the point, obsessed instead with a take on wages, the wrong scapegoat.