If Oliver Kamm in the Times (Dec 29th) is correct, we could all soon be paying more for our Chinese-made goods as a new minimum wage works its way through the system.
He reports that Beijing has announced rises across the board, and points out that higher wages might increase inflation (already worryingly high for basics like vegetables) and affect Western economies by raising the price of Chinese exports. This in turn might lower foreign demand for Chinese goods and stimulate domestic demand for imports, effectively the same result as if the Chinese had revalued the Renminbi upwards. So far, so good, but with my utter lack of training in economic theory I’m in no position to comment. What I can comment on is this:
Firstly, these minimum wages are still very low by our standards. In Beijing, for example, the new rate is 65p ($1) per hour, or £113 per month. Secondly, the minimum wage differs vastly between provinces and even cities (provinces are subdivided into perhaps half a dozen “grades”: imagine Leeds and York having different rules), meaning that a worker in remote Anhui (the poor cousin to Jiangsu, Zhejiang and Shanghai) might get only £50 per month. Of course, the minimum wage cannot legally take into account extras such as the “heat allowance” (for outdoor workers, or people working indoors over 33°C), extra shifts, weekend work, social security payments and so on, though the fact that Chinese government websites are insisting that these payments are supplementary is an indication that employers are in fact breaking the law by including them in the basic wage.
Thirdly, the minimum wage doesn’t in practice apply to everybody: farmers, who make up a vast proportion of the population, don’t fall under its scope; then there’s the self-employed, people who scrape a living hawking or peddling - or worse - on the streets, the “employees” who aren’t on an employment contract, the people who are given the Hobson’s choice of accepting a pittance or finding somewhere else to work...
But what struck me most reading this article is that Kamm misrepresents the general cost of living in China with examples lifted from websites catering to rich expats and TOEFL teachers. It's tempting to conclude that, whatever he knows about macroeconomics, he has little grasp of Chinese life or culture. He prices an “inexpensive meal” at a remarkably precise RMB 24.5, when in fact you can fill yourself to bursting on any street corner for half that, while the average worker would be cooking at home for a lot, lot less. What made me smile was his inclusion of a litre of milk (RMB 9.9) and a loaf of fresh bread (RMB 8): you can’t spend more than a day or two in China without realizing that the Chinese neither drink milk (they are, it’s claimed, genetically lactose-intolerant) nor eat bread (baking never caught on in Chinese cuisine). Sure, you can find a tetrapak of Mongolian milk or some tooth-curlingly sweet bread-effect foodstuff in 7-Eleven, Kedi or Carrefour if you’re in a city, but illustrating the cost of living for people on minimum wage by citing the price of milk and bread is like a Japanese journalist bemoaning the price of pre-prepared sushi at Morrisons in Whalley Range, or, more pertinently, a Chinese labourer visiting Gerrard Street and thinking “100 kuai for a plate of beancurd? That’s my weekly bleedin’ wage!”
Is it too late to pass a law requiring everyone who writes about China in the broadsheets to have at least a passing first-hand knowledge of the place?