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Estimating the Relative Level of Minimum Wage in China
Ye Linxiang (叶林祥) , Li Shi (李实) and Yang Can(杨灿)
School of Economics, Nanjing University of Finance and Economics, Nanjing, China
,
School of Economics and Business Administration, Beijing Normal University, Beijing, China
Abstract: It is generally believed in existing literature that China’s minimum wage
is too low and must be raised substantially. Such a view is highly misleading given the
inconsistent statistical standards for minimum and average wages. In order to ensure
comparability, this paper has adjusted the statistical scope for minimum and average wages
respectively. If employees of urban private and self-employed businesses are included in
calculating the average wage, the minimum-to-average wage ratio will increase by about
0
.06; if the minimum wage standards of various localities include personal contributions to
social insurance and the housing fund, the minimum-to-average wage ratio will increase by
.008; if overtime pay is deducted from the average wage, the minimum-to-average wage
0
ratio will further increase by around 0.06.In addition, if the median wage is used in place
of the average wage, the minimum-to-average wage ratio will increase by at least 0.08.
After these adjustments, China’s minimum-to-average wage ratio for 2013 will increase
from 0.28 to 0.49, which is within the range of between 0.40 and 0.60 that is recognized
internationally as reasonable. Our analysis suggests that as far as the immediate interests
of workers are concerned, it is more imperative to unify the statistical approaches for
minimum and average wages in China than to raise the minimum wage standard. In order
to achieve the expected effect, simply raising the minimum wage alone is not enough. What
is also necessary is to enhance supervision and inspection on compliance by firms with the
minimum wage policy, particularly the overtime pay regulations. An alternative is to replace
monthly minimum wage with hourly minimum wage.
Kwaegyewgoaprsds: minimum wage, urban private and self-employed businesses, overtime pay,
JEL Classification Codes: J81, J38, J88
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