China’s Surprise Wage Jump Shows Government Supporting Consumers

  • Urban wage growth climbs to 10.1% for first pick up since 2011
  • More workers leave state-run enterprises for private companies

China’s wage growth accelerated last year, defying the slowest economic expansion in a quarter century, as the government pushed ahead with its strategy of boosting incomes and consumption to cut reliance on fading heavy industries.

The average annual urban wage increased 10.1 percent last year to 62,029 yuan ($9,410), according to the National Bureau of Statistics, to post the first acceleration since 2011 and exceed the 9.5 percent pace of growth in 2014. The number doesn’t cover the country’s 190 million who are self-employed or workers at some private enterprises.

Policy makers have increased some minimum wages and given better raises to government employees to help cash-rich consumers spend more on everything from cinema tickets to smartphones as the economy shifts from its reliance on manufacturing and construction. Data released Wednesday showed the official manufacturing purchasing managers index stabilized last month just above the dividing line between deteriorating and improving conditions.

In another sign of resilience in the labor market, as state firms cut jobs, those who remain were paid more, while some of those who left were hired in the burgeoning private sector, the NBS data showed. That’s good news for policy makers intent on cutting excess capacity from bloated zombie enterprises.

Yet rapid wages growth doesn’t look sustainable, even to Finance Minister Lou Jiwei, who said in March that salary increases that have risen faster than labor productivity in recent years is "not sustainable in the long run." Economists forecast weakening income growth in a March survey by Bloomberg News.

To date, things have held up. Employment creation this year has topped the pace policy makers target, according to a Ministry of Human Resources and Social Security official. And demand for labor remained stable in April, with 112 vacancies for every 100 job seekers.

In what’s likely a welcome decline, the ranks of state-sector workers edged down to 62.1 million last year from 63.1 million in 2014, the NBS data showed.

On the other hand, salaries of those SOE employees rose 14 percent, more than the 8.8 percent increase in 2014, pacing the across-the-board acceleration in wages growth.

Faster wage growth and slower economic expansions don’t usually go together, which suggests at least some of the gains are due to other factors, according to Chen Xingdong, the chief China economist at BNP Paribas SA in Beijing. One of those: State workers used to get subsidies for workplace cafeterias or gift cards for groceries, but many employers have scrapped such perks amid the anti-corruption campaign, so have probably offset those cuts with fatter paychecks, Chen said.

The wage data NBS noted is an average of salaries at state-owned, collectively-owned, those with foreign investors, and some other categories such as limited liability firms. Companies with foreign investors usually pay the highest salaries, though those numbers weren’t included in the 2015 report.