Wages are dropping in china!

Your Corporate Social responsibility Partner

As we are performing audits all the year long and we are always analyzing the results, we often perceive the new trends in factories ahead of fully confirmed study. China is especially interesting for that as factories are changing quickly. Reading trends is then even more fascinating.

One of the current trend is counter-intuitive. The wages are getting lower in Chinese factories while all factories claim on increase of wages costs. Are the factories lying? The concept of wage is actually more complex than it seems. Hour rate, monthly earn wage, payroll… are only partially related. When we say there is a trend to lower wages, it is a trend to lower monthly earn wages only. But this drop is mainly due to the drop of the working time. Thus for the same hourly rate, the workers will earn less. This even more important as the “canceled” working hours are mainly overtime which are more compensated than the normal hours.

Why are factories telling the payroll are increasing? The working time reduction has no impact on the payroll. As long as the hourly rate is the same, having 10 workers working 70 hours a week or 11 workers working 64 hours a day is about the same ( it is actually a little lower as there is less overtime).

But going along with this time reduction, many factories have implemented policies to reduce the workers turnover. Leaves are more and more paid while it was almost never the case in previous years, sick leave are now sometimes granted, seniority bonus are added annually or per quarter… All that is not really a part of the pay-slip, so doesn’t appear in the estimation of the earn wages. Moreover, the legal minimum wage is still on an increase trend, making up for the loss earning due to time reduction. Thus the globally earned wages on the year is not dropping despite what the first look on the pay-slip may indicate, and the payroll is definitely increasing.