China Living Wage Study

7/31/2019 China Living Wage Study

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ChinaLivingWageStudyJanuary2011MindiSchneider(forSolidaridad)INTRODUCTION

Calculatingalivingwageisalwaysacomplexandcontestedprocess,particularlyintermsofdefiningparametersthatappropriatelyreflectlocalconditions.InChina,therearenumeroussocial,economic,andpoliticalfactorsthatfurthercomplicatethisprocess.Weoutlinethesechallengesthroughoutthereport.Thewageoverviewsandanalysespresentedherearebasedondeskworkusingthemostuptodateofficialstatistics,andonfieldbaseddatacollection.InJanuary2011,weadministeredsurveysto133garmentworkersintwoofChinasSpecialEconomicZones:ShenzheninGuangdongProvince,andXiameninFujianProvince1.WealsoconductedstakeholderinterviewswithCSRpractitionersandworkersinthesetwoareas.

I.BACKGROUNDINFORMATIONA.ChinasLegalMinimumWageDuringthestateruneconomyerainChinapriorto1978,wageslevels,bonuses,andbenefitsforworkersweresetandcontrolledbythestate.Workersreceivedincomeandasetofsocialprotections(healthcare,pensions,education,etc.)throughtheirworkunits,whichwerestateownedenterprises(SOEs).Referredtoastheironricebowl,thiswasasystemthatensuredcradletogravesocialsecurityformostofChinasworkers.

Startinginthe1980s,andmoresointhe1990s,thecentralgovernmentbegantoliberalizeSOEs,allowingthemtoestablishtheirowninternalwagestructureswithinoverallwagebudgetssetbythestate.In1994,theLabourLawofthePeoplesRepublicofChina2grantedSOEscompleteindependencetodeterminewagesbasedsolelyonproductivityandprofitability.The1994LabourLawalsoestablishedthefirstminimumwagesysteminChinaadecentralizedsystem,throughwhich:

TheStateshallimplementasystemofguaranteedminimumwages.Specificstandardsonminimumwagesshallbedeterminedbythepeople'sgovernmentsofprovinces,autonomousregionsormunicipalitiesdirectlyundertheCentralGovernmentandreportedtotheStateCouncilfortherecord.

1SeeAnnex1-WageStudySurveyResults.2TheLabourLawofthePeoplesRepublicofChina isavailableinitsentiretyinEnglishat:http://www.acftu.org.cn/template/10002/file.jsp?cid=56&aid=31.


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SpecificsaboutlegalminimumwagecalculationsarenotpublicinformationinChina,butbythetermsofthe1994law,determinationsandreadjustmentsofwagestandardsmustbemadewithreferencetothefollowing:

1. thelowestlivingexpensesoflabourersthemselvesandtheaveragefamilymemberstheysupport;

2. theaveragewagelevelofthesocietyasawhole;3. labourproductivity;4. thesituationofemployment;5. andthedifferentlevelsofeconomicdevelopmentbetweenregions.

In2003,theMinistryofLabourandSocialSecurity(MOLSS)issueditsProvisionsontheMinimumWage.Thisdocumentstatedthatprovincialgovernmentsshouldtakethecostofbasicnecessitiesforemployeesandtheirdependents,andthelocalconsumerpriceindexintoconsiderationwhendeterminingmonthlyminimumwagelevels.TheMOLSSalsosuggestedthatminimumwagesshouldbesetatabout40to60percentoflocalandregional

averagemonthlywages.Theseprovisionsarenotlaw,andminimumwagesinmostprovincesfallshortoftherecommendedlevelof40percent.Thetablebelowshowsthe2010minimummonthlywageasapercentageoftheaveragelocalwageforsevenofthelocationsthatareusedthroughoutthisreportforcomparison3.TheYangtzeRiverDeltaandthePearlRiverDeltaarekeysitesinthegarmentindustry,andwagesacrossthesetworegionsarebelowtheMOLSSthreshold.OnlyinSichuanandJiangxiProvincesareminimumwagesatleast40%ofaverageswages.Noneareanywherenear60%.Table1.ComparisonofminimumwagesasapercentageofaveragewagesacrossthreeregionsinChina.

2010MinimumMonthlyWageasaPercentageofAverageMonthlyWage

Guangdong 37%Jiangsu 37%Zhejiang 39%Shanghai 26%Chongqing 39%Sichuan 41%Jiangxi 42%*Blue=PearlRiverDelta,Yellow=YangtzeRiverDelta,Green=InteriorChina

Chineseauthoritiesconsiderthelegalminimumwagetobethesameasalivingwage,sincebasichouseholdnecessitiesandtheconsumerpriceindexaretobetakenintoaccount.Again,becausetheactualparametersandcalculationsusedinformulatingthelegalminimumarestatesecrets,thisclaimisimpossibletoassess.

3SeetheChinaWagesspreadsheetattachedwiththisreportfordetailedfiguresandinformationsources.


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B.RisingLabourCostsandLabourShortagesLabourcostshavebeenrisinginChinasincetheearly1990s.Thereareseveralreasonsforthis.First,intheprocessoftransitioningtoamarketeconomy,centralauthoritiesshiftedtheresponsibilityforprovidingwagesandsocialsecurityfromthestatetotheprivate

sector.Atthesametimethatthesemoveserodedthestabilityofemployment,income,andsocialbenefitsforworkers,theyalsoincreasedlabourcostsforemployers.Second,therisingcostoflivingallacrossChinaisalsoplayingacentralrole.LabourcostsforemployersarerisingindirectrelationtoincreasesintheConsumerPriceIndex(CPI)andratesofinflation.From1994to2010,theaverageinflationrateinChinawas4.25%.InNovember2010CPI,amajorgaugeofinflation,rosetoa28monthhighof5.1%yearonyear,withpricesgrowing4.9%inurbanareasand5.6%inruralareas.Foodpriceincreasesweremostdramatic,growing11.7%overthesameperiod,whilenonfoodpricesincreasedby1.9%4.Likeminimumwagecalculations,theformulasandparametersusedinCPIcalculationsarestatesecrets,andthereforearenotmadeavailabletothepublic.These

figuresshouldbeunderstoodaslowestimatesoftheactualpriceincreasesthatcausehardshipsforChinasworkersandpoorpopulations.Labourshortagesinthemanufacturingsectoringeneral,andthegarmentsectorinparticular,areanotherimportantfactorinrisinglabourcosts.Inorderattractworkerstothefactory,companiesincreasinglyneedtoofferhigherwagesandsomeemploymentbenefits.TheCSRpractitionersweinterviewedinShenzhenofferedseveralexplanationsforthisphenomenon.First,accordingtoapersonalmanageratagarmentfactory,youngworkers,especiallythoseborninthe1980s,donotwanttospendtheirliveslabouringonanassemblylineinafactory.Theyoftenarriveatthefactorydirectlyfromthecountryside,workforafewmonths,andthenleavetolookforemploymentinshops,massageparlors,

orofficesinthecity,ortotrytostarttheirownbusinesses.Manycomebackwhentheyencounterdifficultiessavingmoney.Anothermanagerstatedthatthegarmentsectorconsistentlyloosesworkerstohightechfactories,wherewagesarehigherandworkingconditionsaregenerallyabitbetter.CSRfactoriesalsostruggletokeepworkerswhofrequentlymovetononCSRworkplaceswheretheycanworkunlimitedovertimehours.Atthesametime,educationlevelsandthenumberofskilledworkersinChinaareincreasing,furtherchallengingtheabilityoffactoriestofindpeopletoworkinmanuallabourpositions.Takentogether,thesefactorshaveresultedinanoverallshiftinlabourtotheservicesector.In2008,39.6%ofChinasworkforcewasemployedinprimaryindustries(agricultureandmining),27.2%insecondaryindustries(manufacturing),and33.2%intertiaryindustries(servicesector)5.

C.GrowthoftheLegalMinimumAccordingtoregulations,theminimumwageinChinashouldbeadjustedatleastonceeverytwoyears.Increaseswerepostponedattheendof2008,however,becauseofthe

4ChinaNationalBureauofStatistics,MonthlyData:http://www.stats.gov.cn/english/statisticaldata/.5ChinaNationalBureauofStatistics,ChinaStatisticalYearbook,2009.


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globalfinancialcrisis.TheninFebruaryof2010,JiangsuProvince,Chinassecondlargestexporterandanimportantsiteinthegarmentindustry,wasthefirsttoannounceamonthlyminimumwageincrease.Byyearsend,27provincesandregionshadraisedminimumwagestandards,withincreasesinexcessof20%in20provinces,andmorethan30%inHainan,Sichuan,andTibet6.TheChongqingmunicipalgovernmentannouncedthat

wagestherewillincreasestartingJanuary1,2011.OnlyGansuProvince,GuizhouProvince,andtheGuangxiAutonomousRegionhavenotannouncedminimumwageincreases.Followingthewaveof2010minimumwageincreases,ShanghainowhasthehighestminimummonthlywagestandardinChinaof1,120(previously960),whileBeijinghasthehighestminimumhourlywageof11(previously9).IncreasesinthemonthlyminimumwageingarmentclusterareasoftheYangtzeRiverDelta,thePearlRiverDelta,andXiamen(SpecialEconomicZoneinSouthernChina)aresummarizedinthetablebelow.Table2.IncreasesinthemonthlyminimumwageforselectlocationsintheYangtze&PearlRiverDeltaregions,andXiamen(SEZ)inFujianProvince.

2010

MinimumWage(toptier)*

2008MinimumWage

(toptier)

RateofIncrease

2008to2010YangtzeRiverDelta

Shanghai 1120$164.22

960$140.76

17%

ZhejiangProvince 1100$161.29

960$140.76

15%

JiangsuProvince 960$140.76

850$124.63

13%

PearlRiverDelta

Guangzhou 1030$151.03

860$126.10

20%

Shenzhen 1100$161.29

1000$146.63

10%

Other

Xiamen 900$131.96

700$102.64

29%

*Provincialgovernmentsgenerallyvaryminimumwagelevelsbylocation,basedonfactorssuchascostsoflivingandlevelsofdevelopment.Thesearefiguresforthetoptierineachlocation.

6ChenXin,Chineseworkerstakehomelargerpaypackets,ChinaDaily,August19,2010,http://www.chinadaily.com.cn/bizchina/201008/19/content_11173835.htm.


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Officialstatisticsreportwageincreasesof13.1%in2007,11.7%in2008,and12.8%in2009forurbanworkunitslinkedmostlytothestate.ANationalBureauofStatisticssurveyshowsthataverageannualsalariesintheprivatesectorrosebyonly6.6%in20097.TheimagebelowfromtheChinaDailysummarizescurrentminimumwagelevelsacross

China.SeealsotheChinaWagesspreadsheetincludedwiththisreport.

Source:ChinaDaily,August19,2010.

Despitethegrowthinlegalminimumwagesacrossthecountry,wagesasaproportionofGDPinChinahavebeensteadilydecreasingforthepast22years,peakingat56.5%in1983,butdecliningto36.7%in20058.Expertsalsowarnthatrisingwagesarenotkeeping

7InternationalLabourOrganization,GlobalWageReport2010/2011:WagePoliciesinTimesofCrisis ,Geneva,2010.8GuoQiang,Incomegapringsalarm,GlobalTimes ,May27,2010,http://china.globaltimes.cn/society/201005/535803.html.


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upwithrisinginflation9.ResultsfromtheWageStudysurveythatSolidaridadadministeredtoworkersinfourgarmentfactoriesinSouthernChinasupportthiswarning.Weaskedworkersiftheirwageshadincreasedoverthepastfewyears,andiftheyweresatisfiedwiththeircurrentlevelofincome.Inbothsurveylocations,thevastmajorityofworkers(82%inXiamenand88%inShenzhen)saidtheirwageshadeitherrisenslightlyorstayed

thesameoverthepastfewyears.Whenaskedtoindicatewhytheyweredissatisfiedwiththeircurrentincomelevels,80%ofworkersinXiamenand75%inShenzhenstatedthatwageswerenotenoughtokeepupwiththerapidlyrisingcostsofliving.D.WageComparisons:CoastalandInteriorChinaAveragewagesandminimumwagelevelsarehigherinChinascoastalregions,includingtheYangtzeandPearlRiverDeltaareas,thanintheinterior.Thetablebelowshowsmonthlyearningsasanaverageacrossalloccupationsin2008.Thesefiguresareforworkersovertheageof16whoareengagedingainfulemploymentinunitsofstate

ownership;collectiveownership;jointownership;shareholdingownership;foreignownership;ownershipbyentrepreneursfromHongKong,Macau,andTaiwan;governmentagencies;politicalandpartyorganizations;socialorganizations;andenterprisesandinstitutions.TheChinaStatisticalYearbooksdonotpublishdataonaverageearningsforworkersinprivateenterprisesorforselfemployedindividuals.ThisisaseverelimitationinanalyzingChinaslabourissues,giventhegrowingprevalenceofprivateemployment.Incities,onlySOEshaveahigherproportionofemployeesthanprivateenterprises10.Table2.AveragemonthlyearningsinCoastalandinteriorChina,2008. Average

MonthlyEarnings

(Chineseyuan)

AverageMonthlyEarnings

($USD)China 2,407.67 $352.82Shanghai 4,343.50 $636.50

Zhejiang 2,801.83 $410.58Guangdong 2,773.50 $406.43Jiangsu 2,608.10 $382.20Chongqing 2,220.00 $325.32

Sichuan 2,060.42 $301.94

Jiangxi 1,716.42 $251.53Source:NationalBureauofStatistics,ChinaStatisticalYearbook,2009.*Yellow=YangtzeRiverDelta,Blue=PearlRiverDelta,Green=InteriorChinaAverageearningsinChongqing,SichuanProvince,andJiangxiProvince(interiorChina)arelowerthanthoseinShanghaiandZhejiang,Guangdong,andJiangsuProvinces(coastal

9YangNing,Increasessalariescantfightinflation,ChinaDaily,December28,2010,http://www.chinadaily.com.cn/bizchina/201012/28/content_11767148.htm.


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China,andkeylocationsinthegarmentindustry).Interiorearningsarealsolowerthanthenationalaverage.AsimilarpatternisevidentforminimumwagesbetweencoastalandinteriorChina.Thetablebelowshowsthemostrecentminimumwagelevels,comparingtherateineach

locationtothatofthecountryshighestlegalminimuminShanghai.Wagesinthefivecoastallocationsareallmorethan85%ofShanghaislevel,whilewagesintheinteriorarelessthan80%.ThelegalminimuminJiangxiProvincesthirdtieristhelowestinallofChina,andislessthanhalfoftheminimuminShanghai.Table3.MonthlyminimumwagesincoastalandinteriorChinawithcomparisonstothehighestnationalminimumwagelevelinShanghai,2010.

MonthlyMinimum

Wage2010

MonthlyMinimum

Wage2010$

%ofMonthlyMinimumWageRateinShanghai

Shanghai 1120 $164.13 100%ZhejiangProvince 1100 $161.20 98%Shenzhen 1100 $161.20 98%

Guangzhou 1030 $150.94 92%

JiangsuProvince 960 $140.68 86%Xiamen(SEZ) 900 $131.96 80%

Chongqing(Urban) 870 $127.49 78%

SichuanProvince(Chengdu) 850 $124.56 76%

Chongqing(Rural) 750 $109.91 67%SichuanProvince(Rural) 650 $95.25 58%

JiangxiProvince(Tier1) 600 $87.92 54%

JiangxiProvince(Tier3) 500 $73.27 45%Source:Various.SeeChinaWagesspreadsheet.*Yellow=coastalChina,Green=China.Companieshavealreadystartedmovingtheiroperationsinlandtotakeadvantageoflowerwagelevels.FoxconnwillmoveitsmajorproductionlinefromShenzhentoLangfanginHebeiProvince,andwillbuildanewplantinZhengzhou,thecapitalcityinHenanProvince.FoxconnisalsopartneringwithHewlettPackard(HP)toinvest$3billiontobuildamanufacturingplantforlaptopsinChongqingthatwillbeoperationalby2012.PfizerwillbuildaresearchanddevelopmentcenterinWuhaninHubeiProvince,andDellis

consideringmovingitsmanufacturingplantinthecoastalcityofXiamentothecentralorwesternregion11.WhileChinahaslongbeenconsideredthebottomintheglobalwageracetothebottom,thatbottomseemstobemovingfromcoastalcitiestotheinterior,withmajorbrandsandcompaniesfollowing.

11Editor,Risinglaborcoststriggerindustrialrelocation,ChinaDaily,July6,2010,http://www.chinadaily.com.cn/bizchina/201007/06/content_10069557.htm.


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E.WageComparisons:ChinaandOtherAsianCountriesChinaslabourcostsarehigherthanthoseinothercountriesimportanttothegarmentindustry.Averagehourlylabourcostsareestimatedasfollows:

o Bangladesh12:US$0.27o Cambodia13: US$0.33o Pakistan14: US$0.37o Vietnam15: US$0.38o India16: US$0.43o China17: US$1.43

SeveralfactorieshaverelocatedoperationsawayfromChinainthesocalledglobalwageracetothebottom.WeinterviewedamanageratagarmentfactoryinShenzhenwhosaidthathiscorporategrouphadalreadymovedonefactorytoVietnamtotakeadvantageoflowerlabourcosts.Headdedthattheyhaveregrettedthisdecisioneversincebecause

whilelabourcostsareindeedlower,productivityandqualityhavedecreased.Inhisestimation,Chinawillcontinuetohaveanadvantageinthegarmentsectorbecauseofitswelltrainedanddisciplinedworkforce.Consistencyandquality,hesaid,areasimportantaslabourcostsinthelongrun.

12ZahidHussain,FinancingLivingWageinBangladeshsGarmentIndustry,WorldBank,August3,2010,

http://blogs.worldbank.org/endpovertyinsouthasia/financinglivingwagebangladesh%E2%80%99sgarmentindustry.13EmergingTextiles,ApparelManufacturingLaborCostsin2008,May23,2008,http://www.emergingtextiles.com/?q=art&s=080523apparellaborcost&r=free.14Ibid.15Ibid.16QuamruiAhsan,StateofCotton&TextileIndustryofBangladesh:2010andBeyond,CottonBangladesh,2005,http://cottonbangladesh.com/October2007/StateOfCotton&TextileIndustry.htm17Calculatedfrom2008monthlygarmentsectorwageinChinaofUS$228.46,assuminga40hourworkweek.


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II.LIVINGWAGEA.MethodologiesandStudiesWorldwide,minimumwagesareofteninsufficientforworkerstosupportthemselvesand

theirfamiliesatanacceptablestandardofliving.Toaddressthisissue,thelivingwageconceptisdeployedasawaytodefineafairanddecentlevelofincomethatwouldenableworkerstomeettheirbasicneeds.Whilethereisnoagreedupondefinitionofbasicneeds,norasinglemethodologytodeterminethem,thegeneralideaisthatbasicneedsaremorethanjustphysicalsubsistence.Livingwagecampaignsalsodifferinwhetherthegoalissolelytoaddresswagelevels,orifconditionsofworksuchasthemaximumhoursinastandardworkweekshouldbeincluded.i.GeneralMethodologicalApproachesFormulationsforcalculatingalivingwagefallintooneoftwogeneralmethodological

approaches18:theBasketofGoodsApproach,ortheNationalEconomicStatisticsApproach.TheBasketofGoodsApproachismostcommonlyused.Therearetwoformulations:theFullMarketBasketApproachandtheExtrapolatedFoodBasketApproach.Inthefirstformulation,acommoditybasketofgoodsbothfoodandnonfooditemsthatapersonorfamilyneedstoconsumeinordertosatisfybasicneedsisconstructed.Thecostofthewholebasketisdetermined,andthewagelevelnecessarytobuythebasketiscalculated.Thismethodspecifiesexactlywhatgoodsarebeingused,andhowmuchtheycost.Itrequiresdetailedcollectionofpricedataforallitemsinthebasket.TheExtrapolatedFoodBasketApproachspecifiesonlyafoodbasketthatapersonorfamily

needstosatisfybasicneeds,andthenextrapolatesnonfoodcostsbasedonaveragefoodexpendituresinthecountryorlocalityunderanalysis.Pricedataarecollectedforfooditems,butnotfornonfooditems.Theassumptionhereisthattheworkeratthelivingwagelevelshouldnotberequiredtospendahigherpercentageofhis/herincomeonfoodthantheaveragepersoninthecountrydoes.ThismethodwasusedbytheUSGovernmenttoestablishthenationalpovertylinein1969,andiswidelyusedinlivingwageformulationstoday,especiallyinthedevelopingworld.TheNationalEconomicStatisticsApproachhastwoformulations,bothofwhichuseeconomicdatatoimputealivingwage,ratherthanpricedataofspecificgoods.TheUnitCostMethodisbasedontheunitlaborcostsinapparelexportindustrieswithpossible

adjustmentsforlevelofdevelopment.ItdeterminesthewagelevelthatwouldequatethelaborcostinmakinganappareliteminaparticularnationwiththatintheUnitedStates.Theincomeneedsofworkersarenotconsideredinthismethod.TheHistoricalComparisonMethodtriestodeterminewhatwagesindevelopingcountriesshouldbebycomparingthemtotheminimumwagesofwealthiercountrieswhentheywereatsimilarstagesof

18RobertC.Shelburne,TheHistoryandTheoryoftheLivingWageConcept,BackgroundReportfortheU.S.DepartmentofLabor,1999.


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economicdevelopment.Thismethoddoesnotconsiderworkerneeds,andisbasedonextremelyproblematicassumptions.NationalEconomicStatisticsApproachesarenotasbroadlyused.Thefollowingsectionssummarizeprevailingconceptsandmethodologiesforcalculating

livingwages.SeealsoAnnex2,whichisincludedwiththisreport.ii.InternationallyComparableLivingWageAcentralissueinlivingwagestudiesiswhetherornotstandardscanbecomparedacrosscountriesandregions.RichardAnker,workingthroughtheInternationalLabourOrganization,proposedanewmethodologyforcalculatinginternationallycomparablelivingwageestimatesin200619.Ankersmethodologyusesthepovertylineinaparticularcountryasastartingpointforcalculatingalivingwage.

Ratherthanusingofficialpovertylinefigures,thefirststepinAnkersmethodistocalculateaninternationallycomparablepovertylineforindividualcountries.Thiscalculationhasthreecomponents.First,foodcosts(FC)areestimatedbasedonestablishinganationalmodeldiet,whichislowincost,reflectsnationalfoodpreferences,andisnutritionallyacceptable.Componentsofthemodeldietinclude:

WHOrecommendationsfornutritionalrequirements,intermsofthepercentageof

caloriesfromprotein,fats,andcarbohydrates, FAOestimatesofnationalpercapitalcalorieneeds, FAOdataonnationalcereals,roots/tubers,pulses/nutsconsumption,and ILOdataonnationalfoodprices(usinglessexpensivespecificfoods).

Afterthemodeldietisestablished,officialnationalfoodpricedatafromtheILOareusedtocalculatethecostofthatdiet,addingmiscellaneousfoodcoststoarriveatatotalforarepresentativeperson.

Second,nonfoodcosts(NFC)areestimatedusingtheExtrapolatedFoodBasketApproach.ThisisbasedonEngelslaw,whichobservesthatasincomeinacountryrises,theproportionofincomespentonfoodfalls,evenifactualexpendituresonfoodrises.ToestimateNFC,foodcosts(frommodeldietcalculations)aremultipliedbythepercentageoftotalexpendituresdevotedtoessentialnonfoodexpensesforaparticularcountry,using

19RichardAnker,Livingwagesaroundtheworld:Anewmethodologyandinternationallycomparableestimates,InternationalLabourReview,2006,145,4(309338).

Povertylineistheincomenecessaryforahouseholdtoaffordalowcostnutritiousdietandnonfoodnecessitiesatlevelsconsideredacceptableinagivencountry.Livingwageisthehourlywageraterequiredtosupportahouseholdatthepovertyline.


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thefollowinglevels:30%forlowincomecountries,40%forlowermiddleincomecountries,50%foruppermiddleincomecountries,and75%forhighincomecountries.Third,NFCsforanaveragepersonarescaleduptothehouseholdbyusingtheCanadianequivalencescale,whichis1+.4foradditionaladultsand+.3foreachchild.

Addingfoodandnonfoodcostscalculatedforarepresentativehouseholdresultsinapovertylineestimateatthehouseholdlevel.ThenextstepinAnkersmodelistocalculatethelivingwagebasedonthisfigure.First,theestimatedpovertylineisdividedbythenumberoffulltimeworkinghoursconsideredacceptableforthecountryinquestion.Thisgivesanestimateofthehourlypayrateaworkerwouldneedinordertosupportahouseholdatthepovertyline.Next,thishourlywageisdividedbythenumberoffulltimeworkerequivalentsperhousehold.Ankercalculatesthisfigurebasedontheconceptoftheaveragecompletedfamilysizeinacountry,usingratesoffertility,mortality,andlabourforceparticipation.Finally,a10%

marginisaddedtothisfiguretoensurethatthelivingwageissustainableincaseofillness,injury,accidents,underemployment,unemployment,andotherunforeseenevents.Usingthisnewmethodology,withtheaveragecompletedfamilysizehouseholdassumption,AnkercalculatedthehourlylivingwagerateinChinausingdatafrom2000at1.38PPP$.Usingthesamedata,butwiththemoretraditionalassumptionofonefulltimeworkerforafamilyoffour,therateforChinain2000was2.08PPP$.Ankerstatesthatthesefiguresarerelativelylowforalowermiddleincomecountry,andthatChinaisuniqueinhisdataset,inthatthelivingwagefiguresignificantlydecreaseswhencountryspecificpolicychoices(abouthowtocounthouseholds)areused.

ii.AsiaFloorWageTheAsiaFloorWage(AFW)wasofficiallylaunchedin2009asaninternationalframeworktodemandastandardizedminimumlivingwageacrossAsia.ThegoaloftheAFWAllianceistocreateanAsiawidebargainingstrategythatestablishesaflooronthesocalledwageracetothebottomthatwillpreventwagecompetitionbetweenAsiancountries.TheAFWisbasedontheincomerequiredforasingleearnertosupportafamilyoffour(2adultsand2children)byworkingalegalmaximumworkingweek(butnolongerthan48hour),excludinganypaymentforovertimeorotherbonuses/allowances20.The

parametersusedintheAFWcalculationarebasicneeds(FC+NFC),thenumberofdependentstobecovered,andthelengthofworkingday/weekinvolved.TheAFWiscalculatedasfollows:

20JeroenMerk,StitchingaDecentWageacrossBorders:TheAsiaFloorWageProposal ,2009(p.8)


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Step1

Dailycostofa3,000caloriefoodbasket

basedonwhatlocalpeopleeatX

3Consumption

Units=

HouseholdDailyFoodCosts(HHDFC)

Step

2 HHDFC X 30(days) =

HouseholdMonthly

FoodCosts(HHMFC)

Step

3 HHMFC X2(NFC

estimate)=

TotalMonthlyCostofHousehold

BasicNeedsTheparametersusedintheAFWcalculationwerenegotiatedamongAlliancemembers.Forfoodcosts,inordertoavoidthedifficultiesofagreeingonthespecificitemsandquantitiesthatshouldbeincludedinthefoodbasket,theAFWuses3,000caloriesperdayasanutritionalthreshold.Thisallowslocalgroupstodecidehowtofilltheirbaskets,basedon

normalworkingclassdietsinthelocality21.Fornonfoodcosts,theAFWusestheExtrapolatedFoodBasketApproach,whichinvolvesmultiplyingfoodcostsbyanonfoodmultiplierbasedonEngelsLaw.TheAFWassumesthattheratioofexpendituresforfoodandnonfoodessentialsshouldbe1:1inmostAsiancountries,or50%eachonFCandNFC.Toallowforvariationacrosslocalities,avariableof10%(plusorminus)isallowed.TheAFWdefinesahouseholdas3consumptionunits,assuminga4memberhousehold,consistingof2adults(1consumptionuniteach)and2children(.5consumptionunitseach).TheAFWmustbeearned(permonth)duringeachcountryslegalmaximum

workingweek,thoughthismustnotbeinexcessof48hoursperweek.TheabovecalculationwascarriedoutforalltheAsiancountriesintheAFWAlliance,andthenconvertedintopurchasingpowerparity(PPP).Therangeoftotalmonthlyhouseholdcostsrangedfrom417.40PPP$inBangladeshto593.60PPP$inIndonesia.FiguresusedforChinascalculationarebelow.Throughapoliticalprocessofdeliberationanddiscussion,theAllianceagreedthat475PPP$wasthemostappropriatefigureforAsiafor2009.Thisequatesto1,638.75permonthinChina. Foodbasketof

3,000caloriesfor(oneadult)

3consumptionunits/month

Foodcosts+nonfoodcosts(50%each)

ConvertedintoUS$

Foodcosts+nonfoodcostsinPPP$

China

193

579

1158

$169.60

584.70

21Inordertoavoidloweringthenutritionalstandardinanycountry,thehighestthresholdof3,000caloriesperdayasdefinedinIndonesiawasusedintheAFWcalculation.


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iii.BasicNeedsWageSA8000,awellknowninternationalstandardforimprovingworkingconditions,usestheconceptofabasicneedswagetoaddressthegapbetweenlegalminimumwagesandactualworkerexpendituresandneeds.Theconceptisdefinedasfollows:

Abasicneedswageenablesworkerstosupporthalftheaveragesizedfamilyabovethepovertyline,basedonlocalpricesneartheworkplace.Basicneedsincludeessentialexpensessuchasfood,cleanwater,clothes,shelter,transport,education,adiscretionaryincome,aswellaslegallymandatedsocialbenefits(whichmayincludehealthcare,medicalinsurance,unemploymentinsurance,retirementplan,andsoon)22.

Intheauditingprocess,thisstandardallowsforflexibilityinhowabasicneedswageiscalculated.Itisnotaformulationperse,butisanimportantlivingwageconcept.AkeyinsightfromtheSA8000isthat,Consultingwithworkersand/ortheirrepresentativesis

thebestwaytohaveanaccuratedeterminationofthelocalbasicneedswage(GuidanceDocumentforSA8000,p.102).iv.InternationalLabourInitiativesTheFairWearFoundationisaninternationalverificationinitiativethatworkswithcompaniesintheclothing(andsewnproducts)industrytoadvocateforimprovedlabourconditions.TheFoundationslabourstandardsincludealivingwageprovisionasfollows:

Wagesandbenefitspaidforastandardworkingweekshallmeetatleastlegalor

industryminimumstandardsandalwaysbesufficienttomeetbasicneedsofworkersandtheirfamiliesandtoprovidesomediscretionaryincome.(ILOConventions26and131).Deductionsfromwagesfordisciplinarymeasuresshallnotbepermittednorshallanydeductionsfromwagesnotprovidedforbynationallawbepermitted.Deductionsshallneverconstituteanamountthatwillleadtheemployeetoreceivelessthantheminimumwage.Employeesshallbeadequatelyandclearlyinformedaboutthespecificationsoftheirwagesincludingwageratesandpayperiod23.

TheFoundationdoesnotprovidespecificparametersorcalculationsusedinlivingwageconsiderations.

TheEthicalTradeInitiative,anallianceofcompanies,tradeunions,andvoluntaryorganizations,alsohasalivingwageprovision,whichstatesthatwagesshouldalwaysbe

22SocialAccountabilityInternational,GuidanceDocumentforSocialAccountability8000(SA8000),2004(p.100).23http://fairwear.org/


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enoughtomeetbasicneedsandtoprovidesomediscretionaryincome24.TheETI,however,isnotspecificaboutwhatitmeansbyalivingwage.v.TheChinaLegalMinimum

Chinasauthoritiesintendthecountrysminimumwageasakindoflivingwage.In2010,thehighestminimumwageratewasinShanghaiat$164.10permonth,andthelowestwasintier3ofJiangxiProvinceat$73.26permonth.ThesewagesaremuchlowerthantheAFWfiguresforChinaof$261.96and$289.28permonth,calculatedusingIMFandWorldBankstatisticsrespectively.EveniflegalminimumwagesinChinawereadequatetocoverbasicneeds,therearestillproblemswithworkersactuallyreceivingthesewagelevels.Employersdontalwaysadheretotheminimumwagelaw,anddeductionssomelegitimate(socialinsuranceandtaxes)andsomeillegitimate(disciplinarypurposes)canquicklyerodeworkerstake

homepay.B.ProblemswithLivingWageConceptsandMethodologiesinGeneralAcrosslivingwagemethodologies,thereareseveralpersistentissuesandlimitationsthatneedtobeaddressed.Theseissueslargelyconcernhowparametersaredefined,andtheassumptionsuponwhichtheyarebased.Determiningwhatbasicneedsarebothfoodandnonfoodneedsisparticularlyproblematic.MostlivingwageformulationsaccountforthecostsofbasicneedsusingoneoftheBasket

ofGoodsApproachesdescribedabove.Theprocessofspecifyingwhatitemsgetincludedinthebasketandinwhatquantitiesishighlycontentious.Itraisesthequestionofwhogetstodeterminewhatcountsasbasic,andusingwhatstandards.Thisquicklybecomesapoliticalissue,sotransparencyateverystageoftheprocessisnecessary.Intermsofthefoodbasket,framersofdifferentlivingwageformulationshavetriedtoaccountforlocalandculturaleatinghabitsbybuildingflexibilityintoproposedmodels.Thisissurelyanimprovementthatmakesthelivingwageconceptmoreregionallyandlocallyspecific.Nutritionalthresholdshavealsobeenusedtoensurethatdietsarecaloricallyadequate,especiallyforworkersengagedinphysicallabour.Toimprovemodelsevenfurther,wealsoneedtotakeintoaccountthecostsassociatedwithbuyingfoodsthat

aresafeandhealthy.Livingwageformulationsneedbuiltinmechanismstoaccountforrisingfoodpricesintheshortterm,particularlyinthecontextofrecentlypast,continuing,andloomingfoodpricecrises.Inthenearfuture,modelsshouldalsoincludeprovisionsforworkerstobuyfoodsthatareorganicallyorsustainablyproduced,orotherwisecertifiedassafe.Weshouldnotconfineworkerstoastandardoflivingthatincludesonlythecheapestpossiblefoods.Thisisespeciallytrueinplaceswheretheleastexpensivefood

24http://www.ethicaltrade.org/resources/keyetiresources/etibasecode


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isalsothemostcaloricallydense,butnutritionallyempty(forexampleintheUnitedStates).Perhapsevenmoreimportantly,thecheapestfoodsinmanyplacesarealsothemostlikelytocarrypesticideandheavymetalresiduesandantibioticresistantdiseasecausingorganisms.Theworkingpoorshouldnotbemademoresusceptibletotheillnessesanddiseasesassociatedthesefoodsystemissues.

Incalculatingnonfoodcosts,theExtrapolatedFoodBasketApproachislimitedinthreemainways.First,bynotspecifyingactualusesofnonfooditemsandtheirassociatedcosts,thiscategoryofbasicneedsbecomesamereabstractionwithnogroundingintherealityofworkingclassexpendituresandneeds.Second,thesecalculationsdonotaccountfortheprivatecostsofpublicservices.Finally,thecalculationofnonfoodcostslimitsthesecoststowhatpeopleactuallyspend,andnottowhattheyneed.TheAFW,forexample,assumesthatfoodcostsandnonfoodcostsareeach50%oftotalexpenditures,basedonEngelsLawthatasincomerises,theproportionofincomespentonfooddecreases.However,usingexpenditurestocalculate

needmissesthefactthatmanyhouseholdssimplydowithoutthingstheyneedlikeinsurance,savings,anddiscretionaryincome.Need,inotherwords,isoftengreaterthanearnings(hencetheneedforalivingwage),andalsogreaterthanexpenditures.When40%ofacountryspopulation,forinstance,areuninsured,thatmeansthat40%ofthepopulationisnotexpendingincometopayforinsurance.Nationalaveragefiguresonthepercentofincomespentonnonfooditems,therefore,donotcapturetheproportionofapopulationthatissimplynotspendingonaparticularcategorysuchasinsurance.EngelsLaw,andtheExtrapolatedFoodBasektApproachtothelivingwage,cannotaccountforvariationandinequalityacrossapopulation.Itisbettertospecifytheactualcostsofnonfoodbasicneedsthantoassumethembasedonthesenationalmeasuresofaverageexpenditures.

C.ProblemswithLivingWageConceptsandMethodologiesinChinaAnalysesofanylabourissueinChina,includingthelivingwage,areincompletewithoutadiscussionofthelivelihooddilemmasofthecountrys200millionmigrantworkers.Livingwageconcepts,methodologies,anddemandsdontaddresstheneedsofthispopulation,andfailtocapturetherealityoftheirlivesandlivelihoods.i.ChinasArmyofMigrantWorkers

ThemassivelevelofurbanruralincomeinequalityinChinatodayisnodoubtoneofthepowerfuldriversoflabourmigration.Thecurrentratioofincomeinurbanareastothatinruralareasis3.33to1,andtheGinicoefficientexceeds0.5(0.4isconsideredawarninglevelinternationally).Atthesametimetherichest10%ofpeopleinChinaaremaking23


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timesmorethanthepoorest10%25.Investmentisurbanfocused,andruralareasandruralpeoplearelargelyleftbehindinChinaseconomicmiracle.TheEastisthelargestregionofdestinationformigrantworkers,receiving70%ofthetotalin2004.Guangdong,inthePearlRiverDelta,isthelargestreceivingprovince.Therewere

about34millionemployedmigrantworkerstherein2004,makingup44%oftheprovincespopulation26.Thesenumbersarechanging,especiallyinthewakeofthereportedmigrantworkershortageinChinascoastcities.Themostrecentofficialfiguresshowthatin2009,therewere33millionmigrantworkersinthePearlRiverDelta(down22.5%from2008),and28millionintheYangtzeRiverDelta(down7.8%from2008)27.MigrantworkersarequiteliterallybuildingChinascitiesandeconomy.Theseworkersaccountfor80%ofjobsintheconstructionsector,68%inmanufacturing,and52%intheservicesector28.Theyarekeytothegarmentindustryaswell.Basedonofficialdatafrom2004,migrantworkersaremostlyyoung(45%aged1625,

16%aged2630,23%aged3140,and16%aged41andolder)andmale(2/3male,1/3female).Theirlevelsofeducationalattainmentarequitelow,with65%ofmigrantworkershavingonlycompletedlowermiddleschool,and18%withalevelofprimaryschoolorbelow29. OursampleofgarmentfactoryworkersinShenzhenandXiamenlooksabit

differentthantheseofficialfiguresfrom2004.Theaverageworkerageinoursamplewas26inShenzhenand30inXiamen,andbothsampleswerenearlyhalfandhalfmaleandfemaleworkers.FortyeightpercentofworkersinShenzhenweremarried,comparedto70%inXiamen.Wedidnotcollecteducationdata.

ThemajorityofworkersinoursamplecamefromprovincesincentralChinatoworkontheSoutherncoast.Only13%ofworkersintheShenzhenfactorysamplewerefromGuangdong,and24%intheXiamenfactorysamplewerefromFujian.ii.DiscriminationTheprimaryreasonthatlivingwageconcepts,methodologies,anddemandsdonotaddresstheneedsofmigrantworkershastodowithdiscriminationtheyfacebasedonthehukousystemofhouseholdregistration.Migrantworkers,eventhosewhohavelivedinthecitieswheretheyworkfor10ormoreyears,arestilllegallyruralresidents.Assuch,theyare

25GuoQiang,2010.26LiShi,RuralMigrantWorkersinChina:Scenario,ChallengesandPublicPolicy ,PolicyIntegrationandStatisticsDepartment,ILO,WorkingPaperNo.89,June2008.27PeoplesDaily,Ruralmigrantworkersaveragemonthlywageat1,417yuan,PeoplesDaily,March24,2010,http://english.peopledaily.com.cn/90001/90776/90882/6929271.html.28Figuresfor2000fromLiShi,2008.29LiShi,2008.


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discriminatedagainstinurbanlabourmarketsandareregardedassecondclassinurbansociety.WageDiscriminationandConditionsofWork

Thereareanumberofchallengesthataccompanythissituation.Intermsofwages,theruralurbandivideinincomeinequalityisexpressedevenwhenmigrantworkerslabourinsidethecity.A2006surveyshowedthathourlywagesformigrantworkerswereaboutonequarterofthoseforlocalurbanworkers30.Migrantworkersalsofaceincomeinsecurity,oftennotreceivingtheirwagesinduetime,andhavinginsufficientrightsprotectiontomanagewagearrearsissues.The2006StateCouncilsurveyofmigrantworkersfoundthatonly47%ofmigrantsarepaidontime31.Jobinsecurityisanotherseriouschallenge.TheCHIPS(ChineseHouseholdIncomeProjectSurvey)surveyin2002foundthatalmost98%ofruralmigrantworkershadchangedjobsatleastoncesincetheymovedtothecity,andtwothirdsofthemhadchangedjobsmore

thantwice.Anotherissueisthatonlyasmallproportionofmigrantworkershavewrittencontractswiththeiremployers,eventhoughcontractsarerequiredbythe2008LaborContractLaw32.AccordingtotheStateCouncilsstudyonmigrantworkersin2006,79%ofmigrantworkershadnosignedlabourcontracts,and15percentoftheworkerssurveyeddidntknowwhatalabourcontractwas33.Withoutwrittencontracts,migrantworkersaregenerallyinaweakpositionwhentheyhavedisputesoverwagepayment.Enforcementofthelegalmaximum40hourworkweekisquitelax,especiallyformigrantworkers.The2002CHIPSdatashowedthat80%ofmigrantworkersworkedsevendaysperweek(fiveisthelegalstandardforlocalworkers),andlessthan30%hadworkinghoursequaltoorlessthanthelegalmaximumworkingtime34.Thisrealityclearly

confoundsmanyoftheassumptionsusedinlivingwagecalculations. Inoursampleoffactoryworkers,97%orworkersinShenzhenand70%inXiamen

indicatedthattheyworked812hoursaday.AllworkersinShenzhenand83%inXiamensaidovertimeisregularlyavailable.Wewerenotallowedtoaskmorespecificquestionsaboutworkhours.WealsointerviewedaworkerinShenzhenwhoworks13hoursaday,6daysaweekinanonCSRfactory(from8amuntil10:30pm,witha1hourlunchbreakanda30minutedinnerbreak).Shetoldusthather78hourworkweekisstandardamongherpeers.

30Ibid.31ResearchOfficeProjectTeam,StateCouncil,ResearchReportonRuralMigrantWorkersinChina ,2006,ChinaYanshiPress(inChinese).32TheLaborContractLawofthePeoplesRepublicofChina isavailableinitsentiretyinEnglishat:http://www.acftu.org.cn/template/10002/file.jsp?cid=56&aid=590.33LiShi,2008.34Ibid.


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Beyondchallengesintermsofthelabourmarketandworkingconditions,thereisamorefundamentaldiscriminationchallenge.Thelivingwageconceptisproposedasawaytodeterminehowmuchaworkerneedstoearninordertosupporthisorherhouseholdtoliveinaparticularplaceataparticularstandardofliving.ButforChinasmigrantworkers,theissueisnotsomuchwhethertheyhaveenoughmoneytopayforbasicneeds(whichis

alsoakeyconsideration),butwhetherornottheyareallowedaccesstothosebasicneedsinthefirstplace.Becauseofthehukousystem,ruralmigrantscannotaccessthesamesocialinsurancebenefitsasurbanresidents.Theyarealsodiscriminatedagainstintermsofhousingandeducation.SocialInsuranceDiscriminationAtthesametimethatcentralauthoritiestransferredresponsibilityforsocialprotectiontotheprivatesector,theyalsolaunchedanewpublicsocialsecuritysystemforemployeeswhoworkinurbanenterprises.Socialinsuranceisthecoreofthissystem,andincludes

oldageinsurance(pensions),unemploymentinsurance,medicalinsurance,industrialinjuryinsurance,andmaternityinsurance.Institutionaldiscriminationoriginatinginthecurrentstructureofthehukousystemleavesmigrantworkersinsecure,uninsured,andunprotected.Further,policiesandtightprofitmarginsdonotcompelemployerstoprovidesocialsecuritiesformigrants.CHIPSdataindicatethatin2002,only5%ofmigrantworkerswerecoveredbyapensionscheme,lessthan2%byunemploymentinsurance,andonly3%bymedicalinsurance.AMinistryofAgriculturestudyin2005foundthat13%ofmigrantworkerswerecoveredbyoccupationalinjuryinsurance,10%bymedicalinsurance,and15%byapensionscheme.The2006StateCouncilstudyshowedthat85%ofmigrantworkershadno

protectionagainstemploymentrelatedinjuries35. WeinterviewedthepersonnelmanagerataCSRfactoryinShenzhen.Shetoldus

thatthecompanyhasagoal,basedonlocalrequirements,that100%ofitsemployeeshavemedicalcoverage.Workersaretopay102eachmonthformedicalinsurance,andthecompanypaystheremaining250.InoursurveyofworkersatthesamefactoryinShenzhen,only37%indicatedthattheyhadmedicalexpendituresofanykind.Thisseemstobeacontradictionbetweenthegoalsofthefactoryandtherealityoftheworkers.Further,weinterviewedanonCSRfactoryworkerwhosaidthathermedicalexpenseswereclosetonothing.Ifshegotsick,sheneverwenttoseeadoctorandonlyrarelyboughtmedicinebecausebothweremuchtooexpensive.

Guangdong,includingShenzhen,isuniqueinthatmigrantworkerscanusetheirmedicalcoverageforservicesinsideGuangdongProvince.Theydonothavetoreturnhomeformedicalcare.

35LiShi,2008.


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HousingDiscriminationAsruralresidents,migrantworkersarenotlegallyallowedtoliveincities.Thevastmajorityofmigrantsliveindormitoriesormakeshifthousingprovidedbyemployersdirectlyonsiteatthefactoryorconstructionsite.Thesefacilitiesarecrowded,andlack

basicfurniture,sanitationfacilities,andheatingandairconditioning.AccordingtoCHIPSdata,45%ofmigrantworkerslivedinhousingwithoutabathroomortoiletin2002,andthisfiguredoesnotincludethesituationindormitories.Eventhoughlivingspaceislimitedandconditionsarepoor,housingcostsstillaccountforanincreasesshareofmigranthouseholdsexpenditures.The2002surveyreportedthatrentaccountedforalmosthalfoftotalhouseholdexpendituresbecauseofrisingcostsandwagestagnation36.ThisisindirectcontradictiontotheassumptionsusedinExtrapolatedFoodBasketApproachestocalculatingnonfoodcosts. DuringaninterviewwithfourworkerrepresentativesatafactoryinShenzhen,we

learnedthatworkerdissatisfactiontherestemmedprimarilynotfromwagelevels,but

fromhousingandfoodissues.Thepersonnelmanagertoldusthat80%oftheirworkersliveinthefactorydorms,with7peopletoaroomandnobathroom.Becausethefactoryonlyhassegregatedmaleandfemaledorms,workerswhoaremarriedand/orhavefamiliesmustrentroomsoutsidethefactory.Thedifferencesincostsareconsiderable.Workerswholiveinthedormspay30permonthforrentand125permonthtoeatalloftheirmealsinthecanteen.Theaveragerentforaroomoutsidethefactoryis170200permonth,andfoodcostsarearound300permonth.Thesituationforthesetwodifferentgroupsofworkersthosewholiveinsidethefactoryandthosewholiveoutsidearemarkedlydifferent.

WeinterviewedaworkeratanonCSRfactoryinShenzhenwhopays300per

monthtorentaroomwithherhusbandwhoisalsoamigrantworker.Herpersonalfoodexpendituresare160amonth,95ofwhichshepaysherself,and65ofwhichispaidbyherfactory.Herhusbandsfoodcostsarethesame.EducationDiscriminationPublicschoolsincitiesarenotfullyopentothechildrenofmigrantworkers.Theymightbedeniedaccesscompletely,orberequiredtopaysignificantlyhigherschoolfeesthanlocalchildren.Asurveyin2001foundthattherewereabout7to8millionchildrenofruralmigrantworkersofschoolage(714yearsold)inChinascities.About16%ofthose

childrenwerenotinschool,and87%ofmigrantchildrenundertheageof7werenotinkindergarten.Thesamesurveyfoundthat67%ofmigrantchildrenpayhigherschoolfeesthanlocalchildren37.Livingwagecalculationsdonotcapturethesechallenges.

37Ibid.


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WeinterviewedaworkerinShenzhenwhopays7,400ayeartosendhissontoprimaryschoolthere.Publicschoolisfreetolocalchildren,butmigrantshavenochoicebuttopayhighfeesatprivateschools.

MigrantWorkersataGlanceNumberofmigrantworkers(MW)inChinain2010 120200millionUrbanruralincomeinequalityratioin2010 3.33to1

DestinationofMW 70%toEasternChina,Guangdonglargestreceivingprovince

NumberofMWintheYangtzeRiverDeltain2009 28million,7.8%lessthan2008

NumberofMWinthePearlRiverDeltain2009 33million,22.5%lessthan2008%ofalljobsheldbyMWintheconstruction,manufacturing,andservicesectorsin2004

80%,68%,52%

AverageeducationlevelofMW Lowermiddleschool

%ofMWwhowerepaidontimein2005 47%

%ofMWwithsignedlabourcontractsin2005 21%%whoknewwhatalabourcontractwasin2005 85%

%whoworked7daysaweekin2002 80%

%whoworkedwithinthelegalmaximumnumberofworkhoursin2002


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householdincludedthemselves(withorwithoutaspouse),theirsiblings,andtheirparents.Theresthadhouseholdswithamixofparents,grandparents,andchildren.Thismeansthatworkersaresupportinghouseholdswithanaverageof5adults,or5consumptionunitstousetheAFWlanguage.

AnotherimportantconsiderationinChinaisthatmembersofthesamemigrantworkerhouseholdoftenliveindifferentplaces.Whileabout20%ofworkersmigratewiththeirfamilies,thevastmajoritydonot,largelybecauseofhukoubaseddiscriminations.Becausehouseholdsaresplitacrosstimeandspace,thecostofbasicneedsaredifferentinatleasttwosenses.First,costsoflivingvarybylocation.Second,migrantworkerswhocometothecityaloneorinsmallgroupsremitapercentageoftheirwagesbacktotheirruralhouseholds.Theseremittancesneedtobepartofthelivingwagecalculation. Inoursurvey,remittanceswerethelargestexpensecategoryforworkersinboth

locations,and70%ofworkersinShenzhenand69%inXiamenindicatedthathelpingtomeettheirfamiliesbasicneedswastheprimaryreasontheylefthometoworkinafactory.

III.WAGESTRUCTURESTheChinaWagesspreadsheetattachedwiththisreportdetailsthefiguresandsourcesofinformationforminimumandaverageswagesacrossthreeregionsinChina,aswellasthegarmentsectorwageandtheAsiaFloorWage.ThetablebelowsummarizeswagestructuresbasedonsecondarydataandonthedatawecollectedthroughinterviewsandsurveysinShenzhenandXiamen.Table4.WagestructuresinShenzhenandXiamen.

Shenzhen

MonthlyShenzhenAnnual

XiamenMonthly

XiamenAnnual

MinimumWage(2010)

1,100 13,200 900 10,800

GarmentSectorWage(2008)

1,559 18,708 1,559 18,708

AsiaFloorWage(2009)

1,639 19,668 1,639 19,668

AverageWagefromSolidaridadSurvey(2011)

1,659 19,908 1,790 21,480

AverageAnnualExpendituresfromSolidaridadSurvey(2011)

38 25,309

38Wedonothaveenoughdataforthisfigure.ThesurveyinstrumentweusedinShenzhenwasunclearonthisquestion.Only23%ofthesurveyrespondentsprovidedanyexpenditurefigures,andeventhisdataisnotreliableenoughtositehere.


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Comparingthesenumbers,thefirstthingthatbecomesabundantlyclearisthatworkersintheCSRfactorieswestudiedaremakingmorethanthelocalminimumwage,theaveragenationalgarmentsectorwage,andtheAsiaFloorWage.AworkeratanonCSRfactoryinShenzhenmadeevenmorebecauseoftheunlimitedovertimeopportunitiesatherfactory.

Heraveragemonthlywageis2,200,paidonapiecerate.Evenatthesehigherthanexpectedwagerates,themajorityofworkersstillindicatedthattheywerehavingtroublepayingforbasicnecessitiesbecauseofrisingprices.Theotherremarkablefindinginourstudyisthataverageexpendituresarehigherthanaveragewages.Therecouldbeseveralexplanationsforthis.First,87%ofworkersintheShenzhensampleand97%inXiamenindicatedthattheirhouseholdshadanothersourceofincome(farming,specialtycrops,animalhusbandry,business,orvillagecadrepositions).Expenditurefiguresmightcombinetheseincomesources.Second,afamilymighthavetwomigrantworkerscontributingincome,forinstancebothahusbandandwife.Surveyrespondentsmayhaveindicatedtotalhouseholdexpenditures,butonlytheirindividual

wages.Whateverthecase,thissignalstheneedtocollectmoredetailedincomeandexpendituredatathatincludesinterviewingandsurveyingnotonlymigrantworkersthemselves,butalsofamiliesinmigrantshometowns.Thiskindofstudywouldalsohelpustobetterunderstandhowtoassessdifferentbasicneedsinthecityandinthecountryside.ThisinformationiskeyforcalculatinganappropriatelivingwagefigureforChina.IV.RECCOMENDATIONSInordertocalculatealivingwageinChina,anumberofissuesneedtofirstbeaddressed.

1. Interviewsshouldaccompanydeskcalculationsinordertosituatethelivingwagestudyinthelivedrealityofworkers.Ideally,interviewsshouldincludebothmigrantworkersandtheirfamilymemberslivinginotherplacesinordertoaccesscostbasicneeddifferencesinthesedifferentlocales.

2. Thedefinitionofbasicneedsshouldbedeterminedinconsultationwithworkersthemselves,notjustfromdatasetsandofficialstatistics.

3. IftheBasketofGoodsApproachisusedtodefinebasiccosts,bothfoodandnonfooditemsshouldbedeterminedbycollectingpricedatainparticularlocalities.TheExtrapolatedFoodBasketApproachshouldnotbeused.

4. Foodcostcalculationsshouldtakeintoaccountdifferentcostsassociatedwithwhetherornotworkerseatinfactorycanteens.

5. Thehouseholdparametershouldbecalculatedasanaveragehouseholdsizebasedoninterviewswithworkersinordertoappropriatelyreflectdifferenthouseholdstructures.

6. Remittancestoruralhouseholdsshouldbeincludedasabasiccost,basedoninterviews.

7. Anylivingwagefigure,oncearrivedat,shouldbecontextualizedwithincurrentlabourlaws,thewaysinwhichtheyareenforced(ornot),andtheparticularsocialcontextinChinathatincludesmigrantworkersandthemanydiscriminatorypracticestheyface.

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China Living Wage Study

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