China Promises 45 Mil. New Jobs, 13% Wage Hike
China’s central government promised to create 45 million new jobs and boost the minimum wage 13% a year through 2015 as it faces increasing anger over the growing wealth gap.
The government also promised efforts to help small businesses, including tax breaks and loans for both employers and jobless workers wanting to start their own businesses, according to Wednesday’s announcement by the cabinet. The pledges apply to the Communist Party’s five-year development plan that began in 2011.
A $2.5 billion fund to finance startup companies had been announced last week.
These initiatives recognize the fact that, as in the US, in China the majority of new jobs are created by small private firms rather than the giant state-owned or publicly-traded firms. Small businesses were hit the hardest by the doubl-whammy of an export slump and government efforts to reduce lending to cool an economy that was overheating. The government’s $600-billion stimulus went mostly to state-owned firms. These factors forced tens of thousands of small businesses into bankruptcy, producing joblessness and unrest.
The Cabinet announcement noted that the 25 million urban workers who must jobs each year are joined by many millions moving to the cities in search of work as more efficient farming methods free up agricultural workers.
Raising wages will increase production cost for exporters and will force more of China’s manufacturers to shift to higher value-adding sectors which the government is seeking to encourage. Higher wages will also help stimulate domestic demand on which the government is relying to drive growth as export markets in Europe suffer the effects of the Euro zone sovereign debt crisis.
But China’s wages remain low by the standards of industrialized nations, making export businesses highly competitive with both advanced nations and low-wage competitors like Vietnam and the Philippines. The minimum wage in Shanghai is only about 1,200 yuan ($200) a month after rising over 10% in 2011. The minimum wage in Tianjin was increased to 1,070 yuan ($175).
“The labor supply and the needs of enterprises do not match,” said the Cabinet’s statement, emphasizing its push to move manufacturers upmarket where more skilled workers are needed.
Consequently, the government’s plan also calls for more vocational training. It will also seek to direct workers without more sophisticated skills into fields like elderly care and other labor-intensive services.
The current push to raise minimum wages represents a dramatic reversal from China’s freezing of wages in 2008 to keep industries more competitive in the wake of the global financial crisis.