Manufacturing earnings and compensation in China

Monthly Labor Review

Volumn 128, Issue 8, 2005, Pages 22-40

  Banister, Judith ^a,b  

^a Javelin Investments   (China)

^b U S CENSUS BUREAU   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 28244460771     PISSN: 00981818     EISSN: 00981818     Source Type: Journal    
DOI: None     Document Type: Review

References (93)

1. The companion piece to this article, "Manufacturing employment in China" (Monthly Labor Review, July 2005, pp. 11-29), noted that China's official statistics reported 83 million manufacturing employees at yearend 2002, but a variety of other available statistics strongly indicated that the actual number was more than 100 million.
2. Banister, "Manufacturing employment in China," noted that China's official statistics reported 38 million city manufacturing employees at yearend 2002. Data on earnings are not available for 8.2 million manufacturing workers in the cities; of these workers, 2.6 million are self-employed. The Bureau of Labor Statistics does not include the self-employed in its comparative estimates of hourly compensation costs, which relate only to production workers. China's data cover both production and nonproduction workers.
3. TVE'S originally were established as collective economic units run by local governments in rural areas and towns. The purpose of TVE'S was, and still is, to employ small farmers and rural laborers in industrial or service occupations in locations not far from their family homes. This effort allows China's vast countryside to become modernized without necessitating massive migration from the villages to cities. In the 1980s, and especially from the 1990s to today, TVE'S shifted from public toward private ownership, and many foreign-funded enterprises became classified as TVE'S. Nowadays, in addition to including small local enterprises, the TVE category can include very large factories in industrial parks outside cities, as well as suburban, town, and rural factories. Companies have incentives to have their factories classified as TVE'S because required social insurance payments are low, statistical reporting requirements are minimal, and the companies receive many legal and tax benefits.
4. To more closely approximate the purchasing power of Chinese manufacturing worker incomes in U.S. dollars, some type of purchasing power parity (that is, the amount of yuan required to purchase the equivalent of $ 1 of goods and services in China) would be needed. Although purchasing power parities provide a better measure of differences in relative price levels than do commercial exchange rates, there are still important limitations in using them to construct comparisons of worker income. For example, the purchasing power parities used may not accurately reflect the actual purchasing patterns of manufacturing workers, and the price data used to construct the parities may not correctly approximate the relative prices of many goods and services. For a discussion of the purchasing power of Chinese manufacturing worker incomes, see Judith Banister, "Manufacturing Employment and Compensation in China," on the Internet at http://www.bls.gov/fls/#publications.
5. The analysis presented herein applies to the mainland of the People's Republic of China and excludes statistics for Hong Kong, Macao, and Taiwan.
6. Banister, "Manufacturing employment in China."
7. Banister, "Manufacturing Employment and Compensation in China."
8. "International Comparisons of Hourly Compensation Costs for Production Workers in Manufacturing," on the Internet at http://www.bls.gov/news.release/ichcc.toc.htm.
9. See Banister, "Manufacturing employment in China," for further background information about China's statistical system.
10. Examples are available of statistical reporting forms and instructions issued to city enterprises to use to report employment and earnings data for the calendar year 2003. A "labor situation form" [Laodong qingkuang biao] was to be submitted to authorities by the end of February 2004. Wage-reporting instructions were in the publication Laodong gongzi; tongji taizhang [Labor wages; statistical accounts] (Beijing, Beijing Municipality Statistical Bureau, 2004), especially p. 2-1.
11. China National Bureau of Statistics, China Statistical Yearbook 2003 (Beijing, China Statistics Press, 2003), pp. 66, 84, 87, 90.
12. China National Bureau of Statistics and China Ministry of Labor, compilers, China Labor Statistical Yearbook (Beijing, China Statistics Press, published annually);
13. China Ministry of Agriculture, TVE Yearbook Editorial Committee, ed., China Village and Town Enterprise Yearbook 2003 [in Chinese] (Beijing, China Agriculture Publishing House, 2003), pp. 130-31.
14. China Labor Statistical Yearbook 2003 (Beijing, China National Bureau of Statistics and China Ministry of Labor, compilers; China Statistics Press, 2003), pp. 630, 638.
15. Chinese sources did not report earnings data for another 8 million urban manufacturing employees: self-employed individual manufacturing workers and the investors and workers in relatively small private manufacturing concerns. It is not known whether this group of city manufacturing employees earns more or less than the "manufacturing employees in urban units." However, some of the employers of these 8 million workers pay lower social insurance payments or none at all to city governments.
16. China Village and Town Enterprise Yearbook 2003, pp. 130-31.
17. Wage-reporting instructions, 2004, p. 2-4.
18. See BLS Handbook of Methods (Bureau of Labor Statistics, 1997), Chapter 12, "Foreign labor statistics," pp. 114-15;
19. and Chris Sparks, Theo Bikoi, and Lisa Moglia, "A perspective on U.S. and foreign compensation costs in manufacturing," Monthly Labor Review, June 2002, pp. 36-50, especially p. 49.
20. See Banister, "Manufacturing employment in China."
21. Sparks, Bikoi, and Moglia, "U.S. and foreign compensation costs," p. 49.
22. Xiaochun Qiao, China's Aging and Social Security of the Elderly: With Reference to Japan's Experiences, Japan External Trade Organization, IDE-JETRO Visiting Research Fellow Monograph Series No. 388 (Chiba, Japan, Institute of Developing Economies, 2004).
23. "Shehui baoxianfei zheng jiao zanxing tiaoli" ("Provisional regulations for payment of social insurance fees"), in Laodong he shehui baoxian zhengce xuanchuan cailiao (Materials on social insurance policy announcements), Beijing, Haidian District Labor and Social Security Office, regulation number 259, promulgated Jan. 22, 1999.
24. Wage-reporting instructions, p. 2-5.
25. BLS Handbook, pp. 114-15;
26. Sparks, Bikoi, and Moglia, "U.S. and foreign compensation costs," p. 37.
27. All data in this paragraph are from China Ministry of Labor, Zhongguo laodongli shichang gongzi zhidao jiawei (2003 nian) [China Labor Force Market Wage. Guide 2003] (Beijing, China Labor Social Security Press, 2004), p. 379.
28. Zhongguo laodongli shichang gongzi zhidao jiawei (2003 nian) [China Labor Force Market Wage. Guide 2003] Ibid., p. 379.
29. Loraine A. West, "Pension reform in China: Preparing for the future," Journal of Development Studies, February 1999, p. 165.
30. In some cities, the social benefit payment that the enterprise is required to pay the government is not strictly a percentage of whatever the total gross salary bill is. For example, in Shanghai for 2003, enterprises had to pay 43.5 percent of the total wage bill, subject to the following constraints: if the reported total wage bill divided by the reported number of employees averaged less than 60 percent of Shanghai's average monthly salary for the first half of 2003, the enterprise still had to pay 43.5 percent of that minimum salary threshold; the maximum payment the enterprise was required to remit was 43.5 percent of the total wage bill that would represent 3 times the average 2003 Shanghai wage. (See Lulu Zhang, "Shanghai region: Updates on Shanghai social benefit affecting FIE monthly overheads," China Briefing; The Practical Application of China Business, June 2004, p. 10.)
31. This procedure is supposed to be applied nationwide, based on State Council Document Number 6. See also Loraine A. West and Daniel Goodkind, Pension Management and Reform in China, NBR Executive Insight Series No. 15 (Seattle, National Bureau of Asian Research, 1999), p. 3.
32. Data for Changshu City are from Qiye shenbao shehui baoxian jiaofei yewu zhinan (Business guide to enterprises on social insurance payments), Jan. 15, 2004; on the Internet at http://www.changshu.gov.cn/H/content/ HQA0000000000002837.htm.
33. Data for Wuxi City are from Shehui baoxianfei jiaofei bili mingxi biao (Table of detailed comparisons of required social insurance payments), 2858 fuwuwang (2858 service Internet site) at http://www.wx2858.com/XCBST/jyzn/ shehuibaoxian.asp.
34. China Labor Statistical Yearbook 2003, pp. 471, 575-81. China had 21.3 million TVE'S of all kinds in 2002, but only 85,000 of them had any rural old-age pension insurance. By yearend 2002, a cumulative total of 54.6 million people had ever contributed to any rural social pension insurance scheme, but during 2002, only 4.1 million contributed to such a system.
35. Louise Fox and Yaohui Zhao, "China's labor market reform: Performance and prospects," background paper for the China 2002 Country Economic Memorandum (Washington, DC, World Bank, 2002);
36. Xiaochun Qiao, China's Aging and Social Security.
37. Xiao-yuan Dong, "The Changing Wage-Structures in the 1990s: A Comparison between Rural and Urban Enterprises in China," paper presented at the International Research Conference on Poverty, Inequality, Labor Market and Welfare Reform in China, Australian National University, Canberra, Australia, August 2004, Table 1, pp. 28-29; on the Internet at http://econrsss.anu.edu.au/pdf/china-abstract-pdf/Dongpaper.pdf.
38. Kim Woodard and Anita Qingli Wang, "Acquisitions in China: A View of the Field," China Business Review, November-December 2004, pp. 34-38,
39. and "Acquisitions in China: Closing the Deal," China Business Review, January-February 2005, p. 35.
40. See Fox and Zhao, "China's labor market reform."
41. See Judith Banister, "Manufacturing employment in China," Monthly Labor Review, July 2005, pp. 11-29, for a further explanation of the underreporting of manufacturing employment and its consequences.
42. Richard Jackson and Neil Howe, The Graying of the Middle Kingdom (Washington, DC, Center for Strategic and International Studies and Prudential Foundation, 2004), p. 14.
43. David Hale and Lyric Hughes Hale, "China takes off," Foreign Affairs, November-December 2003, p. 46;
44. Nicholas R. Lardy, "United States-China ties: reassessing the economic relationship," testimony presented before the Mouse Committee on International Relations, U.S. Mouse of Representatives, Oct. 21, 2003; on the Internet at http://www.iie.com/publications/papers/lardy1003.htm;
45. and Henny Sender, "Self-interest may lead China to revalue yuan," Wall Street Journal, Apr. 19, 2004, p. A2.
46. John Knight and Linda Yueh, "Urban Insiders Versus Rural Outsiders: Complementarity or Competition in China's Urban Labour Market?" paper presented at the International Research Conference on Poverty, Inequality, Labour Market and Welfare Reform in China, Australian National University, Canberra, Australia, August 2004; on the Internet at http://econrsss.anu.edu.au/ chinaconfabstracts.htm.
47. Jianchun Yang, "China Working Time Statistics," on the Internet at http://www.insee.fr/en/nom_def_met/colloques/citygroup/pdf/China-general. pdf;
48. China Labor Statistical Yearbook 2004, p. 111; personal communication with NBS officials.
49. Yang, "China Working Time Statistics," p. 1.
50. See "Excessive Overtime in Chinese Supplier Factories: Causes, Impacts, and Recommendations for Action," Verité Research Paper, September 2004, on the Internet at http://www.verite.org/ Excessive%20Overtime%20in%20Chinese%20Factories.pdf;
51. and Leslie T. Chang, "At 18, Min finds a path to success in migration wave," Wall Street Journal, Nov. 8, 2004, p. A1.
52. See earlier in this article, pp. 27-29.
53. Banister, "Manufacturing employment in China."
54. China Village and Town Enterprise Yearbook 2003, p. 219.
55. Employment weights are used to calculate an estimate of national total labor compensation in manufacturing.
56. Note again that the data for China refer to all employees, while the figures for the United States and other countries refer to production workers. Employees have higher compensation than production workers, so the data for China are overstated to an unknown degree for these comparisons.
57. West, "Pension reform in China," p. 172.
58. Thomas G. Rawski, personal communication, May 28, 2004.
59. Banister, "Manufacturing employment in China," p. 23.
60. Shanghai municipality, for example, excludes from its employment statistics data on in-migrant workers from other provinces. (See Banister, "Manufacturing employment in China.")
61. See Nicholas R. Lardy, "Do China's Abusive Labor Practices Encourage Outsourcing and Drive Down American Wages?" testimony presented before the Senate Democratic Policy Committee Hearing, Mar. 29, 2004; on the Internet at http://democrats.senate.gov/dpc/hearings/hearing14/lardy.pdf.
62. Rawski, personal communication, May 28, 2004;
63. Fox and Zhao, "China's labor market reform," pp. 3, 22.
64. Banister, "Manufacturing employment in China," table 1.
65. "Is the wakening giant a monster?" The Economist, Feb. 15, 2003, pp. 63-65.
66. George Stalk and Dave Young, "How China gets our business," Washington Post, Mar. 7, 2004, p. B3.
67. Norihiko Shirouzu, "China drives auto-parts shift," Asian Wall Street Journal, June 10, 2004, p. A5.
68. Joseph Szczesny, "China an exporter by 2007? Will too many cars force Chinese automakers to begin selling outside the Middle Kingdom?"; on the Internet at http://www.thecarconnection.com/index.asp?article=7233.
69. "Is the wakening giant a monster?" p. 63.
70. For a few examples, see Stalk and Young, "How China gets our business";
71. Szczesny, "China an exporter by 20077";
72. and Chinese Academy of Social Sciences, Industry Economic Research Institute, Zhongguo gongye fazhan baogao [China's Industrial Development Report] (Beijing, Economic Management Press, 2001), pp. 109, 547.
73. Hale and Hale, "China takes off," p. 46.
74. Lardy, "China's Abusive Labor Practices."
75. Fox and Zhao, "China's labor market reform."
76. Matt Forney, "Tug-of-war over trade: As China becomes the world's factory, U.S. and European manufacturers are hurting," Time International (Europe Edition), Feb. 23, 2004, p. 34.
77. "The dragon and the eagle," The Economist, Sept. 30, 2004.
78. See also Lardy, "China's Abusive Labor Practices."
79. Nicholas R. Lardy, discussant, BLS seminar, Washington, DC, Nov. 8, 2004.
80. See Fox and Zhao, "China's labor market reform."
81. Knight and Yueh, "Urban insiders versus rural outsiders."
82. Simon Appleton and Lina Song, "The evolution of wage structure in urban China during reform and retrenchment," paper presented at the International Research Conference on Poverty, Inequality, Labor Market and Welfare Reform in China, Australian National University, Canberra, August 2004, p. 2; on the Internet at http://econrsss.anu.edu.au/chinaconfababstractshtm.
83. Thomas O. Rawski, "Recent developments in China's labour economy," revised November 2003 from a report prepared for the International Labor Office in January 2002, p. 17;
84. see also Fox and Zhao, "China's labor market reform," pp. 3, 22; and the entire Rawski article.
85. Jianchun Yang, "2002 nian zhongguo jiuye qingkuang" ["China 2002 employment situation"], Zhongguo renkou tongji nianjian 2003 [China Population Statistics Yearbook 2003] (Beijing, China Statistics Press, 2003).
86. Rawski, "Recent developments," p. 27;
87. see also Bureau of Labor Statistics, "International comparisons of hourly compensation costs for production workers in manufacturing, 1975-2003"; on the Internet at http://bls.gov/fls/home.htm.
88. Paul French, "Welcome to bubble town," Asian Wall Street Journal, May 27, 2004, p. A7.
89. lain McDaniels, "A critical eye on Shanghai: Will the city's extraordinary growth continue?" China Business Review, January-February 2004, pp. 8-9, especially p. 8.
90. French, "Welcome to bubble town."
91. "String of pearls: China's development," The Economist, Nov. 20, 2004, p. 44.
92. Mu Xin and Zhenpeng Liang, "Mei caigou shang xuejian Zhongguo fangzhi dingdan" ["U.S. purchasers have cut textile orders from China"], Xin kuai bao [New Express], Apr. 28, 2004; on the Internet at http://www.ycwb.com/gb/content/2004-04/28/content_683077.htm.
93. See Banister, "Manufacturing Employment and Compensation," for further information on China's many competitive advantages in manufacturing.