The Minimum Wage’s Problems in China and the Solving Methods

The Minimum Wage’s Problems in China and the Solving Methods

According to the state regulations, the minimum wage is the minimal wage level that the employers should pay for their employees, while the employees provide their labor power in the normal working hours based on their labor contract, which was sign with their employers. The minimum wage is the minimal wage level what is required by law, but it is not include the overtime pay, the allowance of night shift and the legal benefit that the employers should have.

As one of the social security system, the minimum wage provides the basic need for the employers to support themselves and their families. In other way, the minimum wage also compensates the cost of training the labor’s skills for the employees. According Figure 1, the consumer price index was continuing faster, and this result in a negative effect to people who have a lower wage. Based on this situation, in China, in order to protect the basic life of the low-income earner, the government of each province increased the standard of the minimum wage. The minimum wage social security system completed in 2004; therefore, the minimum wage social security system is still having some shortages. For example, the ratio of the minimum wage and the average wage is lower than the standard of the government --- 40%. How to improve the minimum wage system is a problem that needs to be solved.

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Figure 1. the consumer price index from 2004 to 2012 (1978 = 100)

Problems:

        In the different region of China, the development of economic is not balance, and this situation causes that there is a big gap among the standard minimum wages in different regions. From Table 1, we can know that the city, which has the highest minimum wage, is Shenzhen and the minimum wage is 1500 RMB per month. The city, which has the lowest minimum wage, is Hainan and the minimum wage is 830 RMB per month. The differences between the highest minimum wage and the lowest minimum wage is 670 RMB per month, and the number is big.

Table1. the minimum wages of 22 cities and provinces in China (2012)

The development of economic is different in each province, and the cost of life is also different in each province. Therefore, the minimum wage in each province is different. The big difference will make the backward area have more distance with the developed area. (Wang, 2012) Because the low-income family in the backward area cannot afford their children study in the developed area; therefore, the children cannot study with better educational sources. Then the backward area will not have good human resources to develop the economy. Finally, this situation will expand the regional economic development gap.