Wage Inflation Rampant In China As More Provinces Plan Minimum Salary Hikes

Tyler Durden's picture

Several days ago we highlighted that wage inflation in China spreading after Shanghai announced it would hike minimum salaries by 10%. Today, through Global Times we learn that this is just the beginning. Or the continuation rather: it seems that 30 provinces had already hiked minimum wages in 2010: "By the end of 2010, 30 provincial-level regions had raised the standard for the minimum wage, with an average increase of 22.8 percent year-on-year., Yin Chengji, spokesman for the Ministry of Human Resources and Social Security (MHRSS), said Tuesday. According to him, 29 provinces have issued the guideline for the minimum wages, and the benchmark line grew about 2 percent. In Shanghai, the local minimum wage was the highest nationwide, totaling 1,120 yuan ($170.2) per month." And 2011 will be even worse: " Also, according to a China Business News (CBN) report Tuesday, in 2011, many areas would continue to raise the standard. A Xinhua News Agency report Wednesday revealed that northern Chinese
city of Tianjin is considering raising the minimum working wage by 16
percent this year amid rising inflationary pressure and labor shortages." We are confident America's workers will be delighted to know that Bernanke's massively destructive monetary policies are finally resulting in higher salaries... In China. But wait: this also means US consumer purchasing power is about collapse as since very soon all imported Made in China trinkets are about to get far more expensive as already razor thin margined China producers scramble to raise costs to their primary export market.

From Global Times:

Ppreviously, Jiangsu, Guangdong provinces, Beijing and Chongqing had announced to raise the minimum wages this year. Guangdong's wage adjustment range even reached 18.6 percent, according to the report. Shanghai mayor Han Zheng also said recently that the city will raise the minimum wage by more than 10 percent this year.

Debates on whether the minimum wages should be raised have put the government in dilemma: to improve the life of low-income people or to maintain enterprises' economical profits and ensure employment.

A Boss from a Dongguan-based shoe manufacturer said that Guangdong's 18.6 percent adjustment was really high and posed risks to him. He added that although the wages in his factory are higher than the standard now, lifting the standard brings higher expectations from employees.

While according to Han Zhaozhou, head of the Education College of Jinan University,  enterprises that did not perform well should blame its own management and operation, not salaries; and the rises of the minimum wages is helpful to the transformation and upgrading of enterprises in the Pearl River Delta. He added that the current labor shortage is driving Guangdong to raise the minimum wages.

Some may remember the wage strikes that crippled Chinese auto manufacturers in late 2009 and early 2010. Many more of those are coming. But not in the US: where Americans are delighted just to have jobs. Even if it means getting a progressively smaller wage, and paying ever more for virtually everything. At least they can console themselves that Core CPI components, such as home prices which is most certainly dropping, are confirming to the Dictator that his policies are working out really well... for the bankers.

h/t Allen