SGS Evaluates Minimum Wage Situation in China

1/20/2015
The legal minimum wage is the lowest amount that the employers should pay to the employees based on work performed within the legal standard working hours or working hours specified in a legal contract. 

Based on local living expenses and industry standards, this minimum wage should be adjusted to guarantee the employees' basic living standards and discretionary spending and to reduce worker turnover and ensure that the workplace remains attractive to potential employees.

Regular legal minimum wage updates
Since the new Provisions on Minimum Wage were implemented in 2004, local minimum wages in China should be updated at least every two years.  According to the official data from the National Bureau of Statistic (NBS) & the Ministry of Human Resource and Social security, the years since 2011 have seen large increases to this legal minimum wage with an average increase of 22 percent seen in 24 provinces and cities in 2011; an average increase of just over 20 percent in 25 provinces in 2012; and an average of 17 percent across 27 provinces in 2013. However, in 2014, only 19 provinces and cities adjusted their minimum wages and this by an average of 13.3 percent, which is the lowest increase in rates in recent years.

According to the official data from each Human Resources and Social Security department, a total of 14 provinces and cities raised the minimum wage standards in the first half of 2014  (see SGS Safeguards bulletin on China 14 provinces have updated the minimum wage 2014 (Jan-Jul)), and a further 5 provinces and cities raised their minimum wage by Dec. 1 2014.

2013-2014 minimum wage updates (ranked by wage level) are summarized in a table within the latest SafeGuards bulletin.For detailed information on the different regions, cities and towns, please refer to SGS China's Minimum Wage Map.

Local gaps in minimum wage updates
From the above-mentioned table, it can be seen that Shanghai continues to have the highest monthly minimum payment in China in 2014, reaching RMB 1820 per month. It should also be noted, that while the overall average is 13.3 percent, which is less than in previous years, some regions have made higher increases with the highest rates being seen in QingHai, ChongQing and GuiZhou ranging from 18.7 percent, to 21.4 percent due to low minimum salary base last year.

Thus, the gaps of minimum wages are being narrowed between The East and The West. Some migrant workers, who had worked in big cities such as Beijing, Shanghai or Guangzhou in the past, have returned home due to the fact that industry development, wage levels and working conditions are being improved in the Midwest.  According to latest research, the number of migrant workers in Sichuan and Henan, which were main labor-exporting provinces, showed a clear downtrend and a matching increase in the choice of local work.  With the acceleration in industrialization in the Midwest, more and more enterprises are fighting for skilled workers and labor shortages are spreading from the Coast to the Midwest.  In order to attract workers, some enterprises have to raise the basic salary above the required minimum wage standard or offer other benefits which may add to their operating costs.

Annual China minimum wage increase
The annual increase to the minimum wage is to ensure that the living standard for low-earners will not decline due to rising prices. However, for labor-intensive manufacturing industries, this will definitely lead to a new round of cost pressures. In fact, the trend of rising labor cost in China is irreversible, the enterprise are being encouraged to be less dependent on labor by increasing investment and levels of automation and mechanization, so as to improve labor efficiency.

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