Beijing Minimum Wage to Rise 21% amid Inflation Pressure

Beijing city will raise its minimum wage by 21 per cent, the second increase in six months, amid rising inflationary pressures and growing concern over China's widening wealth gap.

The increase, which comes into effect on New Year's day, raises the statutory minimum monthly wage in the Chinese capital to Rmb1,150 ($175 USD) and the hourly rate to Rmb6.7. It follows a rise of 20 per cent in June.

The official measures of annual consumer price inflation in China hit 5.1 per cent in November, up from 4.4 per cent in October, with food prices jumping 11.7 per cent in November from a year earlier.

"While China's living standards have dramatically risen over the past 30 years, the gap between the rich and the poor has sharply widened," Yu Yongding, an influential former adviser to China's central bank, wrote in an editorial last week.

Nationwide increases in minimum wages are part of the government's plan to reduce income disparity and the Chinese economy's heavy reliance on investment, and promote greater consumption by low- and middle-income households. But with many businesses already squeezed by rising input costs, wage increase come at a difficult time and are likely to lead to higher inflation.

With its latest rise, Beijing has the highest minimum wage in the country, just ahead of Shanghai. Other cities and provinces, including the manufacturing hub of Guangdong, are eyeing more increases in the near term.

Source: Jamil Anderlini and Rahul Jacob, Beijing Minimum Wage to Rise by 21% amid Inflation Pressure, Financial Times, December 29, 2010.

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First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 04 January 2011
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