Workers Made Scapegoats of “Economic Downturn”: Guangdong Minimum Wage Frozen for Three Years

In 1993, China issued its first national regulations on enterprises’ statutory minimum wages and in 2004, it issued “Provisions on Statutory Minimum Wages” to further regulate it, requiring it to be reviewed once every two years, if not shorter. Except in 2009, when China was hit by the 2008 Financial Crisis and statutory minimum wage froze nationwide, all provinces have been in line with the legal requirement, i.e. adjusting statutory minimum wages once every two years. On 24 February 2017, the Guangdong Provincial Government issued a “Working Scheme on Reducing Costs for Real Economy Enterprises” (hereafter: the Scheme), stating that in order to reduce labour costs for enterprises, the statutory minimum wage would be reviewed once every three years and the statutory minimum wage for 2017 would be kept at the level of 2015. This is the first case in China, that minimum wage in a province remains unchanged for three years.

The Scheme announces that in order to follow and execute the future development strategy drafted by the Central Government, the Guangdong Provincial Government would conduct reforms in enterprises and policies. Its goal is to cut operating costs for enterprises and push for “supply-side structural reform”. Thus, it plans to reduce the tax rates for all industries, cut labour costs, and other operating costs, and hence, promote competitiveness and ensure economic stability or even growth in Guangdong, under the background of the ongoing economic downturn in China. Back in 2016, the Guangdong Provincial Government declared that it would freeze minimum wage between 2016 and 2017, gradually reduced the employers’ contribution to employees’ pension insurance and housing provident funds to 14 % and not higher than 12% respectively. At the same time, consumer price index in Guangdong Province has increased by 1.5% and 2.3% in 2015 and 2016 respectively, according to National Bureau of Statistics. In other words, though the statutory minimum wage remain frozen due to the so-called economic downturn, prices continue to hike.

A stable supply of jobs become an important rhetoric of the Central Government in recent years. Premier Li Keqiang delivered the annual government work report at the fifth session of the 12th National People's Congress recently, calling “employment creates wealth and is a main source of household income”. Stable employment does not only mean job opportunities, but also job quality, as the Central Government has been pushing for fair distribution of resources and narrowing the income gap in recent years. Statutory minimum wages, according to previous studies conducted by different civil society organizations, have been an important indicator for enterprises in setting frontline workers’ wages. To freeze minimum wage would inevitably affect their livelihood. The State Council promulgated an “Employment Promotion Plan (2011-2015)” in February 2012, aiming to promote an annual growth of wage at 13% all over China and “statutory minimum wage should reach 40% or above the local employees’ average wage”. However, Guangdong Province failed to meet these goals by the end of the fifth session of the 12th National People’s Congress. In 2015, statutory minimum wage level was only equivalent to 28% of the average local wage, falling far behind the expectation of the State Council’s Plan. The new Scheme to freeze the statutory minimum wage clearly violates the national policy directives and regulations. In future, it might be challenged and even face administrative litigation initiated by workers.

Though economic growth has slowed down, Guangdong Province’s GDP has been increased by 8% and 7.5% in 2015 and 2016 respectively. In 2016, its GDP reached almost 8 trillions Yuan, amounting to 10.7% of the national GDP. With such glamorous growth, the decision to freeze minimum wage is sending a message that the Guangdong Government has no intention to share prosperity with the workers. It also illustrates that the current minimum wage could not reflect workers’ real needs. To address workers’ real needs, the government should make its standards and calculation methods of statutory minimum wage public, develop a transparent assessment mechanism and invite workers to participate, rather than decisions made solely by the Ministry of Human Resources and Social Security and participation from state-run trade union and business associations. Meanwhile, the provincial government should pursuit the goal of raising the statutory minimum wage to 40% of local employees’ average wage, instead of freezing them for 3 years. The revision of statutory minimum wage should not be lower than the growth of GDP, i.e. the basic guarantee to share economic prosperity with workers, to stabilize the society for sustainable development.