Wages and Competitiveness in the People's Republic of China

Abstract

This policy note will examine international experiences and practices to ensure labor market competitiveness in the context of gross domestic product growth moderation and upgrading labor skills, in line with government targets to reach higher income levels.

The People’s Republic of China (PRC) has been facing increasing upwards wage pressure, with average real wages for urban workers tripling in less than a decade. Minimum wages grew even faster than average wages, and in 2011 alone, minimum wages increased on average by 17% across the country.

Given the ongoing decline in the country’s labor force it is expected that wage pressures will continue. More disconcertingly, these increases in wages have outpaced labor productivity growth in recent years. Thus, the competitiveness of the country would be adversely affected if these increases in wages are not accompanied by corresponding increases in labor productivity.

This policy note will examine international experiences and practices to ensure labor market competitiveness in the context of gross domestic product growth moderation and upgrading labor skills, in line with government targets to reach higher income levels.