Who Has the Final Say on Our Salary?
On November 17, State Council meeting chaired by Premier Wen Jiabao has transmitted the message that "an overall program on income distribution reform is set to be drafted in the fourth quarter". Such long-awaited reform draft was actually initiated in 2004 and the supposed Wage Regulation has dragged on for years. Some public media learned from the insiders, “if everything goes smoothly, it will be published prior to March. Now, with heatedly discussion and great disputes, it is the very crucial moment for the program. ”
Why does the reform program raise so many disputes? According to some insiders, the program encounters strong opposition from the monopoly industries. Why do these industries strongly oppose to it? It is learned that during the period when “Wage Regulations” is under discussion, more attention is given to the income distribution models of the monopoly industries. What’s more, the discussion group of “Wage Regulations” even required public announcement and public hearings of the salary rise of the monopoly industries. For such comparatively clear provision concerning the salary of the monopoly industries, the expected Wage Regulation fell flat.
The income distribution should be necessarily reformed. Currently, the growth of the resident income in China remains far below the growth of the financial incomes and the corporate incomes. The relevant data of the National Bureau of Statistics (CNBS) indicate, in 2011, the per capita disposable income of the urban residents in China gained a nominal growth up to 14.1% compared with the previous year, so the actual growth reached 8.4% by deducting the price factors, but 0.8% lower than the GDP growth rate. The Ministry of Human Resources and Social Security released “2011 China’s Wage Development Report” : China’s public financial income last year added up to 1.037 million yuan, up to 24.8%, so the growth rate of the per capita disposable income nominal growth for urban residents registered at 1.76 times and the nominal growth of the pure income for the rural residents reached 1.39 times, and the growth rate for the corporate incomes for the same period reached 20% or so, also far exceeding the income of the residents.
This unbalanced situation may exert unfavorable effects: first, the obviously lower resident income is the immediate cause for the sluggish domestic demand, thus negatively affecting the economic growth; second, the obvious lower income of the residents may lead to the social injustice. It is evident that if the residents earn not enough, it is sure that some departments or sectors, say, the government departments and some enterprises, will have a larger proportion in this respect, thus depriving the others of the due income distribution. These few years, the growth of financial incomes and corporate incomes is remarkably higher than incomes of residents, which bears out this judgment of ours.
However, while the incomes for residents remain excessively low, there is a problem related to the fast growth of the wage growth in some industries. According to “2011 China’s Wage Development Report”, some industries gained the faster growth in wages, so the salary income gap between the corporate senior managers and migrant workers is 4553 times, and in recent 5 years the salary for corporate senior managers gained a far more growth than that of the ordinary working staff.
How can we change this situation? Do we really solve these problems by working out “Wage Regulations”? In my opinion, the wish is truly good enough, but there is still a long way to go.
It is easy to understand the low share of residents’ income in GDP, i.e. government fiscal revenue takes too high share. From this perspective, we can solve this problem by tax reduction by formulating the laws and regulations to reduce taxes and administrative fees. Particularly during the current period of economic downturn, the tax reduction will exert obvious effect. Traffic jams occurring in all places nationwide during this year’s “Golden Week” do speak volumes for it.
Nevertheless, can we increase employees’ salaries by formulating the relevant laws and regulations? I am afraid that it is a more complicated question. Here is a very simple answer to it: the relevant laws and regulations should take shape soon if all these problems can be solved by laws. However, how come that the relevant laws and regulations fail to be immediately formulated? We should not merely contribute the reasons to the strong opposition from some interest groups but to the more profound economic reasons.
It must be admitted that within the comparatively longer period in the past, the business owners gains considerable incomes through the capital investment while ordinary employees gain a much lower labor remuneration, but it can not be absolutely attributable to the excessive greed of the capitalists as stated in textbooks under the conventional education system, but it is determined by the following factors: In China, capital is comparatively more scarce compared with the laborers, so the returns gained by capital is obviously much higher than those earned by laborers. Although the overall remuneration for the laborers is much lower than the capital, yet the wages for some laborers in some fields are even much higher than the returns gained by capital: in view of the sluggish public offering funds in recent years, the salary earned by some employees in many of such companies can break even with the returns of the capital, or we have such a situation where the fund companies are operated in the red, but they have to pay higher pay to the employees. How come that it may happen? As we know, in view of these industries, employees are the most competitive assets for the companies. Although the industry remains sluggish at the present time, yet they must maintain the comparatively higher salary level to obtain the better returns in the near future.
Evidence goes like this, in recent years, the wage for low-end laborers gains a considerable rise, and moreover, the problem of “labor shortage” frequently crops up in all areas, so the wage for the posts traditionally regarded as the low-paid ones has increased considerably and the wage of many blue-collars is even far more than that of the ordinary white-collars. How come that this may occur? We can not attribute the reason to the revived conscience towards the blue collars but to the annually gradual decrease of the laborers in the job market. Where the enterprises want to have the competitive employees, they must provide the employees with the competitive salary or wage as required.
In other words, the increase of the employees’ wage or salary should not be attributable to the revived conscience of the business owners, nor to the legal regulations or provisions, but on the contrary, it should be attributable to the cruelly stern market competition. Then what can the law help in this respect? It seems to me that we should comply with the market demand instead of distorting the market, or otherwise the outcome will be totally the other way round. Under the current sluggish economic situations, in particular, the claim for the one-sided “increase of salary” is not particularly desirable. In view of the enterprises, profitability if their essential goals and enterprises should try to seek a balance among all production factors, so we should have the wage strategy most favorable to the corporate development. Suppose we are currently confronted with the sluggish economy, which renders it rather difficult for the corporate operation, the relevant regulations specify the increase of salary or wage without careful consideration, thus considerably increasing the cost for the employees, so in such a case, enterprises are forced to lay off more workers, which will ultimately impair the interests and benefits of the laborers, thus having been validated by so many practical examples at home and abroad.
Most importantly, under the current situation, enterprises are confronted with the problem of excessively higher labor cost, so does it mean that the wage-based remuneration in China is lowly distributed? How come that the cost is extremely higher? This problem appears quite ridiculous, yet it is the actual fact. A research conducted by Prof. Bai Chong’en from Tsinghua University shows that the total sum of the five legal premiums for the social security insurance is equivalent to 40% of the wages. In some areas, it may reach 50%, so this proportion is far more than that for most countries in the world: according to the actual bearing rate lately estimated by the World Bank in 2009, China ranked first out of 181 countries in terms of the legal premium of the social security insurance, approximately two times more than the average level of other three “BRICS” countries, or three times of the level of the five countries in North Europe, 2.8 times of G7 Countries, or 4.6 times of the East Asian neighbors, Hong and Taiwan. The extremely higher payment rate for the social security premiums can not only put a heavier burden onto the enterprises involved with the social security insurance and the employees, greatly impairing the expansion of employment but greatly restricting the growth of the household disposable income and squashing out the development space of the supplemental insurance and the commercial insurance.
In this sense, if we want to change the resident income distribution pattern and solve the problem of the currently lower income of employees, the most fundamental thing we have to do is to reduce enterprises’ heavy burdens other than the simply raising wages for employees. Just as some scholars put it, in a competitive market, the saved part will be ultimately transferred to customers in the form of the much lower product price. We must keep in mind that anything beneficial to the industrial circles is actually beneficial to anyone of us while anything beneficial to privates will be beneficial to the state.” In view of the incomes of the monopolized sectors, “Wage Regulations” can do nothing at all, but we have to resort to the effective approaches to gradually eliminate the monopoly, or otherwise, the market operators will flexibly and efficiently bend their methods to the provisions of the laws and regulation, but the relevant laws and regulations fail to get anywhere in the actual implementation.
Originally published on China Times | 2012-10-31
