Labor issues top the agenda

08:51, June 28, 2010      

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Weeks of labor frictions and strikes at plants across the country have finally registered on the central government's radar.

Measures need to be adopted to foster good relations between workers and employers so that wages can rise and employment levels remain stable, Premier Wen Jiabao said over the weekend.

His speech came one day after a sit-in was resolved at a Japanese auto parts plant located in Nansha, Guangzhou Province.

The 1,200 workers at the plant were given a raise of 800 yuan ($117.78) per month, reported Sunday.

The latest round of labor issues is only the most recent in a long-term nationwide trend toward higher wages.

Average workers' cost of living has risen with economic expansion in the labor-intensive coastal regions due to soaring housing prices, said Lian Ping, chief economist with Bank of Communications.

"This brings on a need for higher wages."

Many provinces and cities recently announced an increase of roughly 20 percent in minimum wages effective July 1. Several ministries and commissions have also mulled an income distribution reform plan, the revision of which is expected later this year.

Economists don't think wage increases will put pressure on inflation in the near term while raising concerns over its long-term implications.

Pay rises will have an influence on the consumer price index (CPI) consisting mainly of food prices, but it is not likely to greatly affect the CPI in the near future, Lian said.

The higher labor cost in costal regions will prompt companies to transfer their production to central and western regions, which could limit the impact of wage increases on inflation nationwide, he said.

"Monetary policy is likely to become more accommodative to inflation over time as wage hikes accelerate," Peng Wensheng, head of China research at Barclays Capital, also said in a note distributed June 14.

He added higher productivity together with infrastructure investment and better education would offset a slow down in economic growth as less people enter the labor force and the rate of investment falls gradually. Peng warned, "China is likely to see slower growth but a higher rate of inflation than in the past decade."

Source: Global Times


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