ChinaLivingWageStudy

January2011 MindiSchneider(forSolidaridad) INTRODUCTION Calculatingalivingwageisalwaysacomplexandcontestedprocess,particularlyinterms ofdefiningparametersthatappropriatelyreflectlocalconditions.InChina,thereare numeroussocial,economic,andpoliticalfactorsthatfurthercomplicatethisprocess.We outlinethesechallengesthroughoutthereport. Thewageoverviewsandanalysespresentedherearebasedondeskworkusingthemost uptodateofficialstatistics,andonfieldbaseddatacollection.InJanuary2011,we administeredsurveysto133garmentworkersintwoofChinasSpecialEconomicZones: ShenzheninGuangdongProvince,andXiameninFujianProvince1.Wealsoconducted stakeholderinterviewswithCSRpractitionersandworkersinthesetwoareas. I.BACKGROUNDINFORMATION A.ChinasLegalMinimumWage DuringthestateruneconomyerainChinapriorto1978,wageslevels,bonuses,and benefitsforworkersweresetandcontrolledbythestate.Workersreceivedincomeanda setofsocialprotections(healthcare,pensions,education,etc.)throughtheirworkunits, whichwerestateownedenterprises(SOEs).Referredtoastheironricebowl,thiswasa systemthatensuredcradletogravesocialsecurityformostofChinasworkers. Startinginthe1980s,andmoresointhe1990s,thecentralgovernmentbegantoliberalize SOEs,allowingthemtoestablishtheirowninternalwagestructureswithinoverallwage budgetssetbythestate.In1994,theLabourLawofthePeoplesRepublicofChina2granted SOEscompleteindependencetodeterminewagesbasedsolelyonproductivityand profitability.The1994LabourLawalsoestablishedthefirstminimumwagesystemin Chinaadecentralizedsystem,throughwhich: TheStateshallimplementasystemofguaranteedminimumwages.Specific standardsonminimumwagesshallbedeterminedbythepeople'sgovernmentsof provinces,autonomousregionsormunicipalitiesdirectlyundertheCentral GovernmentandreportedtotheStateCouncilfortherecord. 1SeeAnnex1WageStudySurveyResults. 2TheLabourLawofthePeoplesRepublicofChinaisavailableinitsentiretyinEnglishat: http://www.acftu.org.cn/template/10002/file.jsp?cid=56&aid=31. 1

SpecificsaboutlegalminimumwagecalculationsarenotpublicinformationinChina,but bythetermsofthe1994law,determinationsandreadjustmentsofwagestandardsmust bemadewithreferencetothefollowing: 1. thelowestlivingexpensesoflabourersthemselvesandtheaveragefamilymembers theysupport; 2. theaveragewagelevelofthesocietyasawhole; 3. labourproductivity; 4. thesituationofemployment; 5. andthedifferentlevelsofeconomicdevelopmentbetweenregions. In2003,theMinistryofLabourandSocialSecurity(MOLSS)issueditsProvisionsonthe MinimumWage.Thisdocumentstatedthatprovincialgovernmentsshouldtakethecostof basicnecessitiesforemployeesandtheirdependents,andthelocalconsumerpriceindex intoconsiderationwhendeterminingmonthlyminimumwagelevels.TheMOLSSalso suggestedthatminimumwagesshouldbesetatabout40to60percentoflocalandregional averagemonthlywages.Theseprovisionsarenotlaw,andminimumwagesinmost provincesfallshortoftherecommendedlevelof40percent.Thetablebelowshowsthe 2010minimummonthlywageasapercentageoftheaveragelocalwageforsevenofthe locationsthatareusedthroughoutthisreportforcomparison3.TheYangtzeRiverDelta andthePearlRiverDeltaarekeysitesinthegarmentindustry,andwagesacrossthesetwo regionsarebelowtheMOLSSthreshold.OnlyinSichuanandJiangxiProvincesare minimumwagesatleast40%ofaverageswages.Noneareanywherenear60%. Table1.Comparisonofminimumwagesasapercentageofaveragewagesacrossthree regionsinChina. 2010MinimumMonthlyWageasa PercentageofAverageMonthlyWage Guangdong 37% Jiangsu 37% Zhejiang 39% Shanghai 26% Chongqing 39% Sichuan 41% Jiangxi 42% *Blue=PearlRiverDelta,Yellow=YangtzeRiverDelta,Green=InteriorChina Chineseauthoritiesconsiderthelegalminimumwagetobethesameasalivingwage,since basichouseholdnecessitiesandtheconsumerpriceindexaretobetakenintoaccount. Again,becausetheactualparametersandcalculationsusedinformulatingthelegal minimumarestatesecrets,thisclaimisimpossibletoassess. 3SeetheChinaWagesspreadsheetattachedwiththisreportfordetailedfiguresandinformationsources. 2

B.RisingLabourCostsandLabourShortages LabourcostshavebeenrisinginChinasincetheearly1990s.Thereareseveralreasonsfor this.First,intheprocessoftransitioningtoamarketeconomy,centralauthoritiesshifted theresponsibilityforprovidingwagesandsocialsecurityfromthestatetotheprivate sector.Atthesametimethatthesemoveserodedthestabilityofemployment,income,and socialbenefitsforworkers,theyalsoincreasedlabourcostsforemployers. Second,therisingcostoflivingallacrossChinaisalsoplayingacentralrole.Labourcosts foremployersarerisingindirectrelationtoincreasesintheConsumerPriceIndex(CPI) andratesofinflation.From1994to2010,theaverageinflationrateinChinawas4.25%.In November2010CPI,amajorgaugeofinflation,rosetoa28monthhighof5.1%yearon year,withpricesgrowing4.9%inurbanareasand5.6%inruralareas.Foodprice increasesweremostdramatic,growing11.7%overthesameperiod,whilenonfoodprices increasedby1.9%4.Likeminimumwagecalculations,theformulasandparametersusedin CPIcalculationsarestatesecrets,andthereforearenotmadeavailabletothepublic.These figuresshouldbeunderstoodaslowestimatesoftheactualpriceincreasesthatcause hardshipsforChinasworkersandpoorpopulations. Labourshortagesinthemanufacturingsectoringeneral,andthegarmentsectorin particular,areanotherimportantfactorinrisinglabourcosts.Inorderattractworkersto thefactory,companiesincreasinglyneedtoofferhigherwagesandsomeemployment benefits.TheCSRpractitionersweinterviewedinShenzhenofferedseveralexplanations forthisphenomenon.First,accordingtoapersonalmanageratagarmentfactory,young workers,especiallythoseborninthe1980s,donotwanttospendtheirliveslabouringon anassemblylineinafactory.Theyoftenarriveatthefactorydirectlyfromthecountryside, workforafewmonths,andthenleavetolookforemploymentinshops,massageparlors, orofficesinthecity,ortotrytostarttheirownbusinesses.Manycomebackwhenthey encounterdifficultiessavingmoney.Anothermanagerstatedthatthegarmentsector consistentlyloosesworkerstohightechfactories,wherewagesarehigherandworking conditionsaregenerallyabitbetter.CSRfactoriesalsostruggletokeepworkerswho frequentlymovetononCSRworkplaceswheretheycanworkunlimitedovertimehours.At thesametime,educationlevelsandthenumberofskilledworkersinChinaareincreasing, furtherchallengingtheabilityoffactoriestofindpeopletoworkinmanuallabour positions.Takentogether,thesefactorshaveresultedinanoverallshiftinlabourtothe servicesector.In2008,39.6%ofChinasworkforcewasemployedinprimaryindustries (agricultureandmining),27.2%insecondaryindustries(manufacturing),and33.2%in tertiaryindustries(servicesector)5. C.GrowthoftheLegalMinimum Accordingtoregulations,theminimumwageinChinashouldbeadjustedatleastonce everytwoyears.Increaseswerepostponedattheendof2008,however,becauseofthe 4ChinaNationalBureauofStatistics,MonthlyData:http://www.stats.gov.cn/english/statisticaldata/. 5ChinaNationalBureauofStatistics,ChinaStatisticalYearbook,2009. 3

globalfinancialcrisis.TheninFebruaryof2010,JiangsuProvince,Chinassecondlargest exporterandanimportantsiteinthegarmentindustry,wasthefirsttoannouncea monthlyminimumwageincrease.Byyearsend,27provincesandregionshadraised minimumwagestandards,withincreasesinexcessof20%in20provinces,andmorethan 30%inHainan,Sichuan,andTibet6.TheChongqingmunicipalgovernmentannouncedthat wagestherewillincreasestartingJanuary1,2011.OnlyGansuProvince,GuizhouProvince, andtheGuangxiAutonomousRegionhavenotannouncedminimumwageincreases. Followingthewaveof2010minimumwageincreases,Shanghainowhasthehighest minimummonthlywagestandardinChinaof1,120(previously960),whileBeijinghas thehighestminimumhourlywageof11(previously9).Increasesinthemonthly minimumwageingarmentclusterareasoftheYangtzeRiverDelta,thePearlRiverDelta, andXiamen(SpecialEconomicZoneinSouthernChina)aresummarizedinthetablebelow. Table2.IncreasesinthemonthlyminimumwageforselectlocationsintheYangtze& PearlRiverDeltaregions,andXiamen(SEZ)inFujianProvince. 2010 2008 Rate MinimumWage MinimumWage ofIncrease (toptier)* (toptier) 2008to2010 YangtzeRiverDelta Shanghai 1120 960 17% $164.22 $140.76 ZhejiangProvince 1100 960 15% $161.29 $140.76 JiangsuProvince 960 850 13% $140.76 $124.63 PearlRiverDelta Guangzhou 1030 860 20% $151.03 $126.10 Shenzhen 1100 1000 10% $161.29 $146.63 Other Xiamen 900 700 29% $131.96 $102.64
*Provincialgovernmentsgenerallyvaryminimumwagelevelsbylocation,basedonfactorssuchascostsof livingandlevelsofdevelopment.Thesearefiguresforthetoptierineachlocation.

6ChenXin,Chineseworkerstakehomelargerpaypackets,ChinaDaily,August19,2010, http://www.chinadaily.com.cn/bizchina/201008/19/content_11173835.htm. 4

Officialstatisticsreportwageincreasesof13.1%in2007,11.7%in2008,and12.8%in 2009forurbanworkunitslinkedmostlytothestate.ANationalBureauofStatisticssurvey showsthataverageannualsalariesintheprivatesectorrosebyonly6.6%in20097. TheimagebelowfromtheChinaDailysummarizescurrentminimumwagelevelsacross China.SeealsotheChinaWagesspreadsheetincludedwiththisreport.

Source:ChinaDaily,August19,2010.

Despitethegrowthinlegalminimumwagesacrossthecountry,wagesasaproportionof GDPinChinahavebeensteadilydecreasingforthepast22years,peakingat56.5%in 1983,butdecliningto36.7%in20058.Expertsalsowarnthatrisingwagesarenotkeeping 7InternationalLabourOrganization,GlobalWageReport2010/2011:WagePoliciesinTimesofCrisis,Geneva,

2010.
8GuoQiang,Incomegapringsalarm,GlobalTimes,May27,2010,

http://china.globaltimes.cn/society/201005/535803.html.

upwithrisinginflation9.ResultsfromtheWageStudysurveythatSolidaridadadministered toworkersinfourgarmentfactoriesinSouthernChinasupportthiswarning.Weasked workersiftheirwageshadincreasedoverthepastfewyears,andiftheyweresatisfied withtheircurrentlevelofincome.Inbothsurveylocations,thevastmajorityofworkers (82%inXiamenand88%inShenzhen)saidtheirwageshadeitherrisenslightlyorstayed thesameoverthepastfewyears.Whenaskedtoindicatewhytheyweredissatisfiedwith theircurrentincomelevels,80%ofworkersinXiamenand75%inShenzhenstatedthat wageswerenotenoughtokeepupwiththerapidlyrisingcostsofliving. D.WageComparisons:CoastalandInteriorChina AveragewagesandminimumwagelevelsarehigherinChinascoastalregions,including theYangtzeandPearlRiverDeltaareas,thanintheinterior.Thetablebelowshows monthlyearningsasanaverageacrossalloccupationsin2008.Thesefiguresarefor workersovertheageof16whoareengagedingainfulemploymentinunitsofstate ownership;collectiveownership;jointownership;shareholdingownership;foreign ownership;ownershipbyentrepreneursfromHongKong,Macau,andTaiwan;government agencies;politicalandpartyorganizations;socialorganizations;andenterprisesand institutions.TheChinaStatisticalYearbooksdonotpublishdataonaverageearningsfor workersinprivateenterprisesorforselfemployedindividuals.Thisisaseverelimitation inanalyzingChinaslabourissues,giventhegrowingprevalenceofprivateemployment.In cities,onlySOEshaveahigherproportionofemployeesthanprivateenterprises10. Table2.AveragemonthlyearningsinCoastalandinteriorChina,2008. Average Average MonthlyEarnings MonthlyEarnings
(Chineseyuan) ($USD)

China 2,407.67 $352.82 Shanghai 4,343.50 $636.50 Zhejiang 2,801.83 $410.58 Guangdong 2,773.50 $406.43 Jiangsu 2,608.10 $382.20 Chongqing 2,220.00 $325.32 Sichuan 2,060.42 $301.94 Jiangxi 1,716.42 $251.53 Source:NationalBureauofStatistics,ChinaStatisticalYearbook,2009. *Yellow=YangtzeRiverDelta,Blue=PearlRiverDelta,Green=InteriorChina AverageearningsinChongqing,SichuanProvince,andJiangxiProvince(interiorChina) arelowerthanthoseinShanghaiandZhejiang,Guangdong,andJiangsuProvinces(coastal 9YangNing,Increasessalariescantfightinflation,ChinaDaily,December28,2010,
http://www.chinadaily.com.cn/bizchina/201012/28/content_11767148.htm.

China,andkeylocationsinthegarmentindustry).Interiorearningsarealsolowerthanthe nationalaverage. AsimilarpatternisevidentforminimumwagesbetweencoastalandinteriorChina.The tablebelowshowsthemostrecentminimumwagelevels,comparingtherateineach locationtothatofthecountryshighestlegalminimuminShanghai.Wagesinthefive coastallocationsareallmorethan85%ofShanghaislevel,whilewagesintheinteriorare lessthan80%.ThelegalminimuminJiangxiProvincesthirdtieristhelowestinallof China,andislessthanhalfoftheminimuminShanghai. Table3.MonthlyminimumwagesincoastalandinteriorChinawithcomparisonstothe highestnationalminimumwagelevelinShanghai,2010. Monthly Monthly %ofMonthly Minimum Minimum MinimumWage Wage2010 Wage2010$ RateinShanghai Shanghai 1120 $164.13 100% ZhejiangProvince 1100 $161.20 98% Shenzhen 1100 $161.20 98% Guangzhou 1030 $150.94 92% JiangsuProvince 960 $140.68 86% Xiamen(SEZ) 900 $131.96 80% Chongqing(Urban) 870 $127.49 78% SichuanProvince(Chengdu) 850 $124.56 76% Chongqing(Rural) 750 $109.91 67% SichuanProvince(Rural) 650 $95.25 58% JiangxiProvince(Tier1) 600 $87.92 54% JiangxiProvince(Tier3) 500 $73.27 45% Source:Various.SeeChinaWagesspreadsheet. *Yellow=coastalChina,Green=China. Companieshavealreadystartedmovingtheiroperationsinlandtotakeadvantageoflower wagelevels.FoxconnwillmoveitsmajorproductionlinefromShenzhentoLangfangin HebeiProvince,andwillbuildanewplantinZhengzhou,thecapitalcityinHenanProvince. FoxconnisalsopartneringwithHewlettPackard(HP)toinvest$3billiontobuilda manufacturingplantforlaptopsinChongqingthatwillbeoperationalby2012.Pfizerwill buildaresearchanddevelopmentcenterinWuhaninHubeiProvince,andDellis consideringmovingitsmanufacturingplantinthecoastalcityofXiamentothecentralor westernregion11.WhileChinahaslongbeenconsideredthebottomintheglobalwage racetothebottom,thatbottomseemstobemovingfromcoastalcitiestotheinterior, withmajorbrandsandcompaniesfollowing. 11Editor,Risinglaborcoststriggerindustrialrelocation,ChinaDaily,July6,2010,
http://www.chinadaily.com.cn/bizchina/201007/06/content_10069557.htm.

E.WageComparisons:ChinaandOtherAsianCountries Chinaslabourcostsarehigherthanthoseinothercountriesimportanttothegarment industry.Averagehourlylabourcostsareestimatedasfollows: o Bangladesh12:US$0.27 o Cambodia13: US$0.33 o Pakistan14: US$0.37 o Vietnam15: US$0.38 o India16: US$0.43 17: o China US$1.43 SeveralfactorieshaverelocatedoperationsawayfromChinainthesocalledglobalwage racetothebottom.WeinterviewedamanageratagarmentfactoryinShenzhenwhosaid thathiscorporategrouphadalreadymovedonefactorytoVietnamtotakeadvantageof lowerlabourcosts.Headdedthattheyhaveregrettedthisdecisioneversincebecause whilelabourcostsareindeedlower,productivityandqualityhavedecreased.Inhis estimation,Chinawillcontinuetohaveanadvantageinthegarmentsectorbecauseofits welltrainedanddisciplinedworkforce.Consistencyandquality,hesaid,areasimportant aslabourcostsinthelongrun.

12ZahidHussain,FinancingLivingWageinBangladeshsGarmentIndustry,WorldBank,August3,2010,
http://blogs.worldbank.org/endpovertyinsouthasia/financinglivingwagebangladesh%E2%80%99s garmentindustry. 13EmergingTextiles,ApparelManufacturingLaborCostsin2008,May23,2008, http://www.emergingtextiles.com/?q=art&s=080523apparellaborcost&r=free. 14Ibid. 15Ibid. 16QuamruiAhsan,StateofCotton&TextileIndustryofBangladesh:2010andBeyond,CottonBangladesh, 2005,http://cottonbangladesh.com/October2007/StateOfCotton&TextileIndustry.htm 17Calculatedfrom2008monthlygarmentsectorwageinChinaofUS$228.46,assuminga40hourworkweek.

II.LIVINGWAGE A.MethodologiesandStudies Worldwide,minimumwagesareofteninsufficientforworkerstosupportthemselvesand theirfamiliesatanacceptablestandardofliving.Toaddressthisissue,thelivingwage conceptisdeployedasawaytodefineafairanddecentlevelofincomethatwouldenable workerstomeettheirbasicneeds.Whilethereisnoagreedupondefinitionofbasic needs,norasinglemethodologytodeterminethem,thegeneralideaisthatbasicneeds aremorethanjustphysicalsubsistence.Livingwagecampaignsalsodifferinwhetherthe goalissolelytoaddresswagelevels,orifconditionsofworksuchasthemaximumhoursin astandardworkweekshouldbeincluded. i.GeneralMethodologicalApproaches Formulationsforcalculatingalivingwagefallintooneoftwogeneralmethodological approaches18:theBasketofGoodsApproach,ortheNationalEconomicStatisticsApproach. TheBasketofGoodsApproachismostcommonlyused.Therearetwoformulations:the FullMarketBasketApproachandtheExtrapolatedFoodBasketApproach.Inthefirst formulation,acommoditybasketofgoodsbothfoodandnonfooditemsthataperson orfamilyneedstoconsumeinordertosatisfybasicneedsisconstructed.Thecostofthe wholebasketisdetermined,andthewagelevelnecessarytobuythebasketiscalculated. Thismethodspecifiesexactlywhatgoodsarebeingused,andhowmuchtheycost.It requiresdetailedcollectionofpricedataforallitemsinthebasket. TheExtrapolatedFoodBasketApproachspecifiesonlyafoodbasketthatapersonorfamily needstosatisfybasicneeds,andthenextrapolatesnonfoodcostsbasedonaveragefood expendituresinthecountryorlocalityunderanalysis.Pricedataarecollectedforfood items,butnotfornonfooditems.Theassumptionhereisthattheworkerattheliving wagelevelshouldnotberequiredtospendahigherpercentageofhis/herincomeonfood thantheaveragepersoninthecountrydoes.ThismethodwasusedbytheUSGovernment toestablishthenationalpovertylinein1969,andiswidelyusedinlivingwage formulationstoday,especiallyinthedevelopingworld. TheNationalEconomicStatisticsApproachhastwoformulations,bothofwhichuse economicdatatoimputealivingwage,ratherthanpricedataofspecificgoods.TheUnit CostMethodisbasedontheunitlaborcostsinapparelexportindustrieswithpossible adjustmentsforlevelofdevelopment.Itdeterminesthewagelevelthatwouldequatethe laborcostinmakinganappareliteminaparticularnationwiththatintheUnitedStates. Theincomeneedsofworkersarenotconsideredinthismethod.TheHistoricalComparison Methodtriestodeterminewhatwagesindevelopingcountriesshouldbebycomparing themtotheminimumwagesofwealthiercountrieswhentheywereatsimilarstagesof 18RobertC.Shelburne,TheHistoryandTheoryoftheLivingWageConcept,BackgroundReportfortheU.S. DepartmentofLabor,1999. 9

economicdevelopment.Thismethoddoesnotconsiderworkerneeds,andisbasedon extremelyproblematicassumptions.NationalEconomicStatisticsApproachesarenotas broadlyused. Thefollowingsectionssummarizeprevailingconceptsandmethodologiesforcalculating livingwages.SeealsoAnnex2,whichisincludedwiththisreport. ii.InternationallyComparableLivingWage Acentralissueinlivingwagestudiesiswhetherornotstandardscanbecomparedacross countriesandregions.RichardAnker,workingthroughtheInternationalLabour Organization,proposedanewmethodologyforcalculatinginternationallycomparable livingwageestimatesin200619.Ankersmethodologyusesthepovertylineinaparticular countryasastartingpointforcalculatingalivingwage. Povertylineistheincomenecessaryforahouseholdtoaffordalowcostnutritiousdiet andnonfoodnecessitiesatlevelsconsideredacceptableinagivencountry. Livingwageisthehourlywageraterequiredtosupportahouseholdatthepovertyline. Ratherthanusingofficialpovertylinefigures,thefirststepinAnkersmethodisto calculateaninternationallycomparablepovertylineforindividualcountries.This calculationhasthreecomponents.First,foodcosts(FC)areestimatedbasedon establishinganationalmodeldiet,whichislowincost,reflectsnationalfoodpreferences, andisnutritionallyacceptable.Componentsofthemodeldietinclude: WHOrecommendationsfornutritionalrequirements,intermsofthepercentageof caloriesfromprotein,fats,andcarbohydrates, FAOestimatesofnationalpercapitalcalorieneeds, FAOdataonnationalcereals,roots/tubers,pulses/nutsconsumption,and ILOdataonnationalfoodprices(usinglessexpensivespecificfoods). Afterthemodeldietisestablished,officialnationalfoodpricedatafromtheILOareusedto calculatethecostofthatdiet,addingmiscellaneousfoodcoststoarriveatatotalfora representativeperson. Second,nonfoodcosts(NFC)areestimatedusingtheExtrapolatedFoodBasketApproach. ThisisbasedonEngelslaw,whichobservesthatasincomeinacountryrises,the proportionofincomespentonfoodfalls,evenifactualexpendituresonfoodrises.To estimateNFC,foodcosts(frommodeldietcalculations)aremultipliedbythepercentageof totalexpendituresdevotedtoessentialnonfoodexpensesforaparticularcountry,using 19RichardAnker,Livingwagesaroundtheworld:Anewmethodologyandinternationallycomparable
estimates,InternationalLabourReview,2006,145,4(309338).

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thefollowinglevels:30%forlowincomecountries,40%forlowermiddleincome countries,50%foruppermiddleincomecountries,and75%forhighincomecountries. Third,NFCsforanaveragepersonarescaleduptothehouseholdbyusingtheCanadian equivalencescale,whichis1+.4foradditionaladultsand+.3foreachchild. Addingfoodandnonfoodcostscalculatedforarepresentativehouseholdresultsina povertylineestimateatthehouseholdlevel.ThenextstepinAnkersmodelistocalculate thelivingwagebasedonthisfigure. First,theestimatedpovertylineisdividedbythenumberoffulltimeworkinghours consideredacceptableforthecountryinquestion.Thisgivesanestimateofthehourlypay rateaworkerwouldneedinordertosupportahouseholdatthepovertyline.Next,this hourlywageisdividedbythenumberoffulltimeworkerequivalentsperhousehold. Ankercalculatesthisfigurebasedontheconceptoftheaveragecompletedfamilysizein acountry,usingratesoffertility,mortality,andlabourforceparticipation.Finally,a10% marginisaddedtothisfiguretoensurethatthelivingwageissustainableincaseofillness, injury,accidents,underemployment,unemployment,andotherunforeseenevents. Usingthisnewmethodology,withtheaveragecompletedfamilysizehousehold assumption,AnkercalculatedthehourlylivingwagerateinChinausingdatafrom2000at 1.38PPP$.Usingthesamedata,butwiththemoretraditionalassumptionofonefulltime workerforafamilyoffour,therateforChinain2000was2.08PPP$.Ankerstatesthat thesefiguresarerelativelylowforalowermiddleincomecountry,andthatChinaisunique inhisdataset,inthatthelivingwagefiguresignificantlydecreaseswhencountryspecific policychoices(abouthowtocounthouseholds)areused. ii.AsiaFloorWage TheAsiaFloorWage(AFW)wasofficiallylaunchedin2009asaninternationalframework todemandastandardizedminimumlivingwageacrossAsia.ThegoaloftheAFWAlliance istocreateanAsiawidebargainingstrategythatestablishesaflooronthesocalledwage racetothebottomthatwillpreventwagecompetitionbetweenAsiancountries. TheAFWisbasedontheincomerequiredforasingleearnertosupportafamilyoffour(2 adultsand2children)byworkingalegalmaximumworkingweek(butnolongerthan48 hour),excludinganypaymentforovertimeorotherbonuses/allowances20.The parametersusedintheAFWcalculationarebasicneeds(FC+NFC),thenumberof dependentstobecovered,andthelengthofworkingday/weekinvolved. TheAFWiscalculatedasfollows: 20JeroenMerk,StitchingaDecentWageacrossBorders:TheAsiaFloorWageProposal,2009(p.8) 11

Step 1 Step 2 Step 3

Dailycostofa 3,000caloriefoodbasket basedonwhatlocalpeopleeat HHDFC HHMFC

X X X

3 Consumption Units 30(days) 2(NFC estimate)

= = =

HouseholdDaily FoodCosts (HHDFC) HouseholdMonthly FoodCosts (HHMFC) TotalMonthly CostofHousehold BasicNeeds

TheparametersusedintheAFWcalculationwerenegotiatedamongAlliancemembers.For foodcosts,inordertoavoidthedifficultiesofagreeingonthespecificitemsandquantities thatshouldbeincludedinthefoodbasket,theAFWuses3,000caloriesperdayasa nutritionalthreshold.Thisallowslocalgroupstodecidehowtofilltheirbaskets,basedon normalworkingclassdietsinthelocality21. Fornonfoodcosts,theAFWusestheExtrapolatedFoodBasketApproach,whichinvolves multiplyingfoodcostsbyanonfoodmultiplierbasedonEngelsLaw.TheAFWassumes thattheratioofexpendituresforfoodandnonfoodessentialsshouldbe1:1inmostAsian countries,or50%eachonFCandNFC.Toallowforvariationacrosslocalities,avariableof 10%(plusorminus)isallowed. TheAFWdefinesahouseholdas3consumptionunits,assuminga4memberhousehold, consistingof2adults(1consumptionuniteach)and2children(.5consumptionunits each).TheAFWmustbeearned(permonth)duringeachcountryslegalmaximum workingweek,thoughthismustnotbeinexcessof48hoursperweek. TheabovecalculationwascarriedoutforalltheAsiancountriesintheAFWAlliance,and thenconvertedintopurchasingpowerparity(PPP).Therangeoftotalmonthlyhousehold costsrangedfrom417.40PPP$inBangladeshto593.60PPP$inIndonesia.Figuresused forChinascalculationarebelow.Throughapoliticalprocessofdeliberationand discussion,theAllianceagreedthat475PPP$wasthemostappropriatefigureforAsiafor 2009.Thisequatesto1,638.75permonthinChina. Foodbasketof Foodcosts+ Foodcosts+ 3,000calories 3consumption nonfoodcosts Converted nonfood for(oneadult) units/month (50%each) intoUS$ costsinPPP$ China 193 579 1158 $169.60 584.70 21Inordertoavoidloweringthenutritionalstandardinanycountry,thehighestthresholdof3,000calories
perdayasdefinedinIndonesiawasusedintheAFWcalculation.

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iii.BasicNeedsWage SA8000,awellknowninternationalstandardforimprovingworkingconditions,usesthe conceptofabasicneedswagetoaddressthegapbetweenlegalminimumwagesandactual workerexpendituresandneeds.Theconceptisdefinedasfollows: Abasicneedswageenablesworkerstosupporthalftheaveragesizedfamily abovethepovertyline,basedonlocalpricesneartheworkplace.Basicneeds includeessentialexpensessuchasfood,cleanwater,clothes,shelter,transport, education,adiscretionaryincome,aswellaslegallymandatedsocialbenefits(which mayincludehealthcare,medicalinsurance,unemploymentinsurance,retirement plan,andsoon)22. Intheauditingprocess,thisstandardallowsforflexibilityinhowabasicneedswageis calculated.Itisnotaformulationperse,butisanimportantlivingwageconcept.Akey insightfromtheSA8000isthat,Consultingwithworkersand/ortheirrepresentativesis thebestwaytohaveanaccuratedeterminationofthelocalbasicneedswage(Guidance DocumentforSA8000,p.102). iv.InternationalLabourInitiatives TheFairWearFoundationisaninternationalverificationinitiativethatworkswith companiesintheclothing(andsewnproducts)industrytoadvocateforimprovedlabour conditions.TheFoundationslabourstandardsincludealivingwageprovisionasfollows: Wagesandbenefitspaidforastandardworkingweekshallmeetatleastlegalor industryminimumstandardsandalwaysbesufficienttomeetbasicneedsof workersandtheirfamiliesandtoprovidesomediscretionaryincome.(ILO Conventions26and131).Deductionsfromwagesfordisciplinarymeasuresshall notbepermittednorshallanydeductionsfromwagesnotprovidedforbynational lawbepermitted.Deductionsshallneverconstituteanamountthatwillleadthe employeetoreceivelessthantheminimumwage.Employeesshallbeadequately andclearlyinformedaboutthespecificationsoftheirwagesincludingwagerates andpayperiod23. TheFoundationdoesnotprovidespecificparametersorcalculationsusedinlivingwage considerations. TheEthicalTradeInitiative,anallianceofcompanies,tradeunions,andvoluntary organizations,alsohasalivingwageprovision,whichstatesthatwagesshouldalwaysbe 22SocialAccountabilityInternational,GuidanceDocumentforSocialAccountability8000(SA8000),2004(p.
23http://fairwear.org/

100).

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enoughtomeetbasicneedsandtoprovidesomediscretionaryincome24.TheETI, however,isnotspecificaboutwhatitmeansbyalivingwage. v.TheChinaLegalMinimum Chinasauthoritiesintendthecountrysminimumwageasakindoflivingwage.In2010, thehighestminimumwageratewasinShanghaiat$164.10permonth,andthelowestwas intier3ofJiangxiProvinceat$73.26permonth.Thesewagesaremuchlowerthanthe AFWfiguresforChinaof$261.96and$289.28permonth,calculatedusingIMFandWorld Bankstatisticsrespectively. EveniflegalminimumwagesinChinawereadequatetocoverbasicneeds,therearestill problemswithworkersactuallyreceivingthesewagelevels.Employersdontalways adheretotheminimumwagelaw,anddeductionssomelegitimate(socialinsuranceand taxes)andsomeillegitimate(disciplinarypurposes)canquicklyerodeworkerstake homepay. B.ProblemswithLivingWageConceptsandMethodologiesinGeneral Acrosslivingwagemethodologies,thereareseveralpersistentissuesandlimitationsthat needtobeaddressed.Theseissueslargelyconcernhowparametersaredefined,andthe assumptionsuponwhichtheyarebased.Determiningwhatbasicneedsarebothfood andnonfoodneedsisparticularlyproblematic. MostlivingwageformulationsaccountforthecostsofbasicneedsusingoneoftheBasket ofGoodsApproachesdescribedabove.Theprocessofspecifyingwhatitemsgetincludedin thebasketandinwhatquantitiesishighlycontentious.Itraisesthequestionofwhogetsto determinewhatcountsasbasic,andusingwhatstandards.Thisquicklybecomesapolitical issue,sotransparencyateverystageoftheprocessisnecessary. Intermsofthefoodbasket,framersofdifferentlivingwageformulationshavetriedto accountforlocalandculturaleatinghabitsbybuildingflexibilityintoproposedmodels. Thisissurelyanimprovementthatmakesthelivingwageconceptmoreregionallyand locallyspecific.Nutritionalthresholdshavealsobeenusedtoensurethatdietsare caloricallyadequate,especiallyforworkersengagedinphysicallabour.Toimprovemodels evenfurther,wealsoneedtotakeintoaccountthecostsassociatedwithbuyingfoodsthat aresafeandhealthy.Livingwageformulationsneedbuiltinmechanismstoaccountfor risingfoodpricesintheshortterm,particularlyinthecontextofrecentlypast,continuing, andloomingfoodpricecrises.Inthenearfuture,modelsshouldalsoincludeprovisionsfor workerstobuyfoodsthatareorganicallyorsustainablyproduced,orotherwise certifiedassafe.Weshouldnotconfineworkerstoastandardoflivingthatincludesonly thecheapestpossiblefoods.Thisisespeciallytrueinplaceswheretheleastexpensivefood 24http://www.ethicaltrade.org/resources/keyetiresources/etibasecode 14

isalsothemostcaloricallydense,butnutritionallyempty(forexampleintheUnited States).Perhapsevenmoreimportantly,thecheapestfoodsinmanyplacesarealsothe mostlikelytocarrypesticideandheavymetalresiduesandantibioticresistantdisease causingorganisms.Theworkingpoorshouldnotbemademoresusceptibletotheillnesses anddiseasesassociatedthesefoodsystemissues. Incalculatingnonfoodcosts,theExtrapolatedFoodBasketApproachislimitedinthree mainways.First,bynotspecifyingactualusesofnonfooditemsandtheirassociatedcosts, thiscategoryofbasicneedsbecomesamereabstractionwithnogroundingintherealityof workingclassexpendituresandneeds.Second,thesecalculationsdonotaccountforthe privatecostsofpublicservices. Finally,thecalculationofnonfoodcostslimitsthesecoststowhatpeopleactuallyspend, andnottowhattheyneed.TheAFW,forexample,assumesthatfoodcostsandnonfood costsareeach50%oftotalexpenditures,basedonEngelsLawthatasincomerises,the proportionofincomespentonfooddecreases.However,usingexpenditurestocalculate needmissesthefactthatmanyhouseholdssimplydowithoutthingstheyneedlike insurance,savings,anddiscretionaryincome.Need,inotherwords,isoftengreaterthan earnings(hencetheneedforalivingwage),andalsogreaterthanexpenditures.When40% ofacountryspopulation,forinstance,areuninsured,thatmeansthat40%ofthe populationisnotexpendingincometopayforinsurance.Nationalaveragefiguresonthe percentofincomespentonnonfooditems,therefore,donotcapturetheproportionofa populationthatissimplynotspendingonaparticularcategorysuchasinsurance.Engels Law,andtheExtrapolatedFoodBasektApproachtothelivingwage,cannotaccountfor variationandinequalityacrossapopulation.Itisbettertospecifytheactualcostsofnon foodbasicneedsthantoassumethembasedonthesenationalmeasuresofaverage expenditures. C.ProblemswithLivingWageConceptsandMethodologiesinChina AnalysesofanylabourissueinChina,includingthelivingwage,areincompletewithouta discussionofthelivelihooddilemmasofthecountrys200millionmigrantworkers.Living wageconcepts,methodologies,anddemandsdontaddresstheneedsofthispopulation, andfailtocapturetherealityoftheirlivesandlivelihoods. i.ChinasArmyofMigrantWorkers ThemassivelevelofurbanruralincomeinequalityinChinatodayisnodoubtoneofthe powerfuldriversoflabourmigration.Thecurrentratioofincomeinurbanareastothatin ruralareasis3.33to1,andtheGinicoefficientexceeds0.5(0.4isconsideredawarning levelinternationally).Atthesametimetherichest10%ofpeopleinChinaaremaking23

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timesmorethanthepoorest10%25.Investmentisurbanfocused,andruralareasandrural peoplearelargelyleftbehindinChinaseconomicmiracle. TheEastisthelargestregionofdestinationformigrantworkers,receiving70%ofthetotal in2004.Guangdong,inthePearlRiverDelta,isthelargestreceivingprovince.Therewere about34millionemployedmigrantworkerstherein2004,makingup44%ofthe provincespopulation26.Thesenumbersarechanging,especiallyinthewakeofthe reportedmigrantworkershortageinChinascoastcities.Themostrecentofficialfigures showthatin2009,therewere33millionmigrantworkersinthePearlRiverDelta(down 22.5%from2008),and28millionintheYangtzeRiverDelta(down7.8%from2008)27. MigrantworkersarequiteliterallybuildingChinascitiesandeconomy.Theseworkers accountfor80%ofjobsintheconstructionsector,68%inmanufacturing,and52%inthe servicesector28.Theyarekeytothegarmentindustryaswell. Basedonofficialdatafrom2004,migrantworkersaremostlyyoung(45%aged1625, 16%aged2630,23%aged3140,and16%aged41andolder)andmale(2/3male,1/3 female).Theirlevelsofeducationalattainmentarequitelow,with65%ofmigrantworkers havingonlycompletedlowermiddleschool,and18%withalevelofprimaryschoolor below29. OursampleofgarmentfactoryworkersinShenzhenandXiamenlooksabit differentthantheseofficialfiguresfrom2004.Theaverageworkerageinoursamplewas 26inShenzhenand30inXiamen,andbothsampleswerenearlyhalfandhalfmaleand femaleworkers.FortyeightpercentofworkersinShenzhenweremarried,comparedto 70%inXiamen.Wedidnotcollecteducationdata. ThemajorityofworkersinoursamplecamefromprovincesincentralChinato workontheSoutherncoast.Only13%ofworkersintheShenzhenfactorysamplewere fromGuangdong,and24%intheXiamenfactorysamplewerefromFujian. ii.Discrimination Theprimaryreasonthatlivingwageconcepts,methodologies,anddemandsdonotaddress theneedsofmigrantworkershastodowithdiscriminationtheyfacebasedonthehukou systemofhouseholdregistration.Migrantworkers,eventhosewhohavelivedinthecities wheretheyworkfor10ormoreyears,arestilllegallyruralresidents.Assuch,theyare 25GuoQiang,2010. 26LiShi,RuralMigrantWorkersinChina:Scenario,ChallengesandPublicPolicy,PolicyIntegrationand
StatisticsDepartment,ILO,WorkingPaperNo.89,June2008.
27PeoplesDaily,Ruralmigrantworkersaveragemonthlywageat1,417yuan,PeoplesDaily,March24,

2010,http://english.peopledaily.com.cn/90001/90776/90882/6929271.html.
28Figuresfor2000fromLiShi,2008. 29LiShi,2008.

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discriminatedagainstinurbanlabourmarketsandareregardedassecondclassinurban society. WageDiscriminationandConditionsofWork Thereareanumberofchallengesthataccompanythissituation.Intermsofwages,the ruralurbandivideinincomeinequalityisexpressedevenwhenmigrantworkerslabour insidethecity.A2006surveyshowedthathourlywagesformigrantworkerswereabout onequarterofthoseforlocalurbanworkers30.Migrantworkersalsofaceincome insecurity,oftennotreceivingtheirwagesinduetime,andhavinginsufficientrights protectiontomanagewagearrearsissues.The2006StateCouncilsurveyofmigrant workersfoundthatonly47%ofmigrantsarepaidontime31. Jobinsecurityisanotherseriouschallenge.TheCHIPS(ChineseHouseholdIncomeProject Survey)surveyin2002foundthatalmost98%ofruralmigrantworkershadchangedjobs atleastoncesincetheymovedtothecity,andtwothirdsofthemhadchangedjobsmore thantwice.Anotherissueisthatonlyasmallproportionofmigrantworkershavewritten contractswiththeiremployers,eventhoughcontractsarerequiredbythe2008Labor ContractLaw32.AccordingtotheStateCouncilsstudyonmigrantworkersin2006,79% ofmigrantworkershadnosignedlabourcontracts,and15percentoftheworkers surveyeddidntknowwhatalabourcontractwas33.Withoutwrittencontracts,migrant workersaregenerallyinaweakpositionwhentheyhavedisputesoverwagepayment. Enforcementofthelegalmaximum40hourworkweekisquitelax,especiallyformigrant workers.The2002CHIPSdatashowedthat80%ofmigrantworkersworkedsevendays perweek(fiveisthelegalstandardforlocalworkers),andlessthan30%hadworking hoursequaltoorlessthanthelegalmaximumworkingtime34.Thisrealityclearly confoundsmanyoftheassumptionsusedinlivingwagecalculations. Inoursampleoffactoryworkers,97%orworkersinShenzhenand70%inXiamen indicatedthattheyworked812hoursaday.AllworkersinShenzhenand83%inXiamen saidovertimeisregularlyavailable.Wewerenotallowedtoaskmorespecificquestions aboutworkhours.WealsointerviewedaworkerinShenzhenwhoworks13hoursaday,6 daysaweekinanonCSRfactory(from8amuntil10:30pm,witha1hourlunchbreakand a30minutedinnerbreak).Shetoldusthather78hourworkweekisstandardamongher peers. 30Ibid. 31ResearchOfficeProjectTeam,StateCouncil,ResearchReportonRuralMigrantWorkersinChina,2006, ChinaYanshiPress(inChinese). 32TheLaborContractLawofthePeoplesRepublicofChinaisavailableinitsentiretyinEnglishat:
http://www.acftu.org.cn/template/10002/file.jsp?cid=56&aid=590.
33LiShi,2008. 34Ibid.

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Beyondchallengesintermsofthelabourmarketandworkingconditions,thereisamore fundamentaldiscriminationchallenge.Thelivingwageconceptisproposedasawayto determinehowmuchaworkerneedstoearninordertosupporthisorherhouseholdto liveinaparticularplaceataparticularstandardofliving.ButforChinasmigrantworkers, theissueisnotsomuchwhethertheyhaveenoughmoneytopayforbasicneeds(whichis alsoakeyconsideration),butwhetherornottheyareallowedaccesstothosebasicneeds inthefirstplace.Becauseofthehukousystem,ruralmigrantscannotaccessthesamesocial insurancebenefitsasurbanresidents.Theyarealsodiscriminatedagainstintermsof housingandeducation. SocialInsuranceDiscrimination Atthesametimethatcentralauthoritiestransferredresponsibilityforsocialprotectionto theprivatesector,theyalsolaunchedanewpublicsocialsecuritysystemforemployees whoworkinurbanenterprises.Socialinsuranceisthecoreofthissystem,andincludes oldageinsurance(pensions),unemploymentinsurance,medicalinsurance,industrial injuryinsurance,andmaternityinsurance.Institutionaldiscriminationoriginatinginthe currentstructureofthehukousystemleavesmigrantworkersinsecure,uninsured,and unprotected.Further,policiesandtightprofitmarginsdonotcompelemployerstoprovide socialsecuritiesformigrants. CHIPSdataindicatethatin2002,only5%ofmigrantworkerswerecoveredbyapension scheme,lessthan2%byunemploymentinsurance,andonly3%bymedicalinsurance. AMinistryofAgriculturestudyin2005foundthat13%ofmigrantworkerswerecovered byoccupationalinjuryinsurance,10%bymedicalinsurance,and15%byapension scheme.The2006StateCouncilstudyshowedthat85%ofmigrantworkershadno protectionagainstemploymentrelatedinjuries35. WeinterviewedthepersonnelmanagerataCSRfactoryinShenzhen.Shetoldus thatthecompanyhasagoal,basedonlocalrequirements,that100%ofitsemployeeshave medicalcoverage.Workersaretopay102eachmonthformedicalinsurance,andthe companypaystheremaining250.Inoursurveyofworkersatthesamefactoryin Shenzhen,only37%indicatedthattheyhadmedicalexpendituresofanykind.Thisseems tobeacontradictionbetweenthegoalsofthefactoryandtherealityoftheworkers. Further,weinterviewedanonCSRfactoryworkerwhosaidthathermedicalexpenses wereclosetonothing.Ifshegotsick,sheneverwenttoseeadoctorandonlyrarelybought medicinebecausebothweremuchtooexpensive. Guangdong,includingShenzhen,isuniqueinthatmigrantworkerscanusetheirmedical coverageforservicesinsideGuangdongProvince.Theydonothavetoreturnhomefor medicalcare. 35LiShi,2008. 18

HousingDiscrimination Asruralresidents,migrantworkersarenotlegallyallowedtoliveincities.Thevast majorityofmigrantsliveindormitoriesormakeshifthousingprovidedbyemployers directlyonsiteatthefactoryorconstructionsite.Thesefacilitiesarecrowded,andlack basicfurniture,sanitationfacilities,andheatingandairconditioning.AccordingtoCHIPS data,45%ofmigrantworkerslivedinhousingwithoutabathroomortoiletin2002,and thisfiguredoesnotincludethesituationindormitories.Eventhoughlivingspaceislimited andconditionsarepoor,housingcostsstillaccountforanincreasesshareofmigrant householdsexpenditures.The2002surveyreportedthatrentaccountedforalmosthalfof totalhouseholdexpendituresbecauseofrisingcostsandwagestagnation36.Thisisin directcontradictiontotheassumptionsusedinExtrapolatedFoodBasketApproachesto calculatingnonfoodcosts. DuringaninterviewwithfourworkerrepresentativesatafactoryinShenzhen,we learnedthatworkerdissatisfactiontherestemmedprimarilynotfromwagelevels,but fromhousingandfoodissues.Thepersonnelmanagertoldusthat80%oftheirworkers liveinthefactorydorms,with7peopletoaroomandnobathroom.Becausethefactory onlyhassegregatedmaleandfemaledorms,workerswhoaremarriedand/orhave familiesmustrentroomsoutsidethefactory.Thedifferencesincostsareconsiderable. Workerswholiveinthedormspay30permonthforrentand125permonthtoeatall oftheirmealsinthecanteen.Theaveragerentforaroomoutsidethefactoryis170200 permonth,andfoodcostsarearound300permonth.Thesituationforthesetwo differentgroupsofworkersthosewholiveinsidethefactoryandthosewholiveoutside aremarkedlydifferent. WeinterviewedaworkeratanonCSRfactoryinShenzhenwhopays300per monthtorentaroomwithherhusbandwhoisalsoamigrantworker.Herpersonalfood expendituresare160amonth,95ofwhichshepaysherself,and65ofwhichispaidby herfactory.Herhusbandsfoodcostsarethesame. EducationDiscrimination Publicschoolsincitiesarenotfullyopentothechildrenofmigrantworkers.Theymightbe deniedaccesscompletely,orberequiredtopaysignificantlyhigherschoolfeesthanlocal children.Asurveyin2001foundthattherewereabout7to8millionchildrenofrural migrantworkersofschoolage(714yearsold)inChinascities.About16%ofthose childrenwerenotinschool,and87%ofmigrantchildrenundertheageof7werenotin kindergarten.Thesamesurveyfoundthat67%ofmigrantchildrenpayhigherschoolfees thanlocalchildren37.Livingwagecalculationsdonotcapturethesechallenges. 37Ibid. 19

 WeinterviewedaworkerinShenzhenwhopays7,400ayeartosendhissonto primaryschoolthere.Publicschoolisfreetolocalchildren,butmigrantshavenochoice buttopayhighfeesatprivateschools. MigrantWorkersataGlance Numberofmigrantworkers(MW)inChinain2010 120200million Urbanruralincomeinequalityratioin2010 3.33to1 DestinationofMW 70%toEasternChina, Guangdonglargestreceivingprovince NumberofMWintheYangtzeRiverDeltain2009 28million,7.8%lessthan2008 NumberofMWinthePearlRiverDeltain2009 33million,22.5%lessthan2008 %ofalljobsheldbyMWintheconstruction, 80%,68%,52% manufacturing,andservicesectorsin2004 AverageeducationlevelofMW Lowermiddleschool %ofMWwhowerepaidontimein2005 47% %ofMWwithsignedlabourcontractsin2005 21% %whoknewwhatalabourcontractwasin2005 85% %whoworked7daysaweekin2002 80% %whoworkedwithinthelegalmaximumnumber <30% ofworkhoursin2002 %withpensions2002/2005 5%/15% %withunemploymentinsurancein2002 <2% %withmedicalinsurancein2005 10% %withinjuryinsurancein2005 13%15% %MWhouseholdincomespentonrentin2002 50% %MWchildrenunderage7notinkindergarten 87% %MWchildrenrequiredtopayhigherschoolfees 67% thanlocalchildren Determiningifamigrantworkercanaffordtoliveinthecitywheretheywork,whilean importantconsideration,doesntaddressthefactthathe/shecannotlegallyliveinthatcity inthefirstplace,orreceivesocialinsurancesthere. iii.HouseholdStructure AnotherproblemwithprevailinglivingwageformulationsintheChinesecontextconcerns howbesttodefineahousehold.ThefamilystructureformanymigrantworkersinChina generallyincludesthreegenerations:workersthemselves,workersparents,andworkers children.Thesekindsofsocialdifferencesarenotadequatelyaccountedforincurrent methodologies. Inoursample,theaveragehouseholdsizewas5.37inShenzhenand5.14inXiamen. SeventypercentofrespondentsinShenzhenand66%inXiamenindicatedthattheir 20

householdincludedthemselves(withorwithoutaspouse),theirsiblings,andtheir parents.Theresthadhouseholdswithamixofparents,grandparents,andchildren.This meansthatworkersaresupportinghouseholdswithanaverageof5adults,or5 consumptionunitstousetheAFWlanguage. AnotherimportantconsiderationinChinaisthatmembersofthesamemigrantworker householdoftenliveindifferentplaces.Whileabout20%ofworkersmigratewiththeir families,thevastmajoritydonot,largelybecauseofhukoubaseddiscriminations.Because householdsaresplitacrosstimeandspace,thecostofbasicneedsaredifferentinatleast twosenses.First,costsoflivingvarybylocation.Second,migrantworkerswhocometothe cityaloneorinsmallgroupsremitapercentageoftheirwagesbacktotheirrural households.Theseremittancesneedtobepartofthelivingwagecalculation. Inoursurvey,remittanceswerethelargestexpensecategoryforworkersinboth locations,and70%ofworkersinShenzhenand69%inXiamenindicatedthathelpingto meettheirfamiliesbasicneedswastheprimaryreasontheylefthometoworkinafactory. III.WAGESTRUCTURES TheChinaWagesspreadsheetattachedwiththisreportdetailsthefiguresandsourcesof informationforminimumandaverageswagesacrossthreeregionsinChina,aswellasthe garmentsectorwageandtheAsiaFloorWage.Thetablebelowsummarizeswage structuresbasedonsecondarydataandonthedatawecollectedthroughinterviewsand surveysinShenzhenandXiamen. Table4.WagestructuresinShenzhenandXiamen. Shenzhen Shenzhen Xiamen Xiamen Monthly Annual Monthly Annual MinimumWage 1,100 13,200 900 10,800 (2010) GarmentSectorWage 1,559 18,708 1,559 18,708 (2008) AsiaFloorWage 1,639 19,668 1,639 19,668 (2009) AverageWagefrom 1,659 19,908 1,790 21,480 SolidaridadSurvey(2011) AverageAnnual 38 Expendituresfrom 25,309 SolidaridadSurvey(2011) 38Wedonothaveenoughdataforthisfigure.ThesurveyinstrumentweusedinShenzhenwasunclearon

thisquestion.Only23%ofthesurveyrespondentsprovidedanyexpenditurefigures,andeventhisdataisnot reliableenoughtositehere.

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 Comparingthesenumbers,thefirstthingthatbecomesabundantlyclearisthatworkersin theCSRfactorieswestudiedaremakingmorethanthelocalminimumwage,theaverage nationalgarmentsectorwage,andtheAsiaFloorWage.AworkeratanonCSRfactoryin Shenzhenmadeevenmorebecauseoftheunlimitedovertimeopportunitiesatherfactory. Heraveragemonthlywageis2,200,paidonapiecerate.Evenatthesehigherthan expectedwagerates,themajorityofworkersstillindicatedthattheywerehavingtrouble payingforbasicnecessitiesbecauseofrisingprices. Theotherremarkablefindinginourstudyisthataverageexpendituresarehigherthan averagewages.Therecouldbeseveralexplanationsforthis.First,87%ofworkersinthe Shenzhensampleand97%inXiamenindicatedthattheirhouseholdshadanothersource ofincome(farming,specialtycrops,animalhusbandry,business,orvillagecadrepositions). Expenditurefiguresmightcombinetheseincomesources.Second,afamilymighthavetwo migrantworkerscontributingincome,forinstancebothahusbandandwife.Survey respondentsmayhaveindicatedtotalhouseholdexpenditures,butonlytheirindividual wages.Whateverthecase,thissignalstheneedtocollectmoredetailedincomeand expendituredatathatincludesinterviewingandsurveyingnotonlymigrantworkers themselves,butalsofamiliesinmigrantshometowns.Thiskindofstudywouldalsohelpus tobetterunderstandhowtoassessdifferentbasicneedsinthecityandinthecountryside. ThisinformationiskeyforcalculatinganappropriatelivingwagefigureforChina. IV.RECCOMENDATIONS InordertocalculatealivingwageinChina,anumberofissuesneedtofirstbeaddressed. 1. Interviewsshouldaccompanydeskcalculationsinordertosituatethelivingwagestudy inthelivedrealityofworkers.Ideally,interviewsshouldincludebothmigrantworkers andtheirfamilymemberslivinginotherplacesinordertoaccesscostbasicneed differencesinthesedifferentlocales. 2. Thedefinitionofbasicneedsshouldbedeterminedinconsultationwithworkers themselves,notjustfromdatasetsandofficialstatistics. 3. IftheBasketofGoodsApproachisusedtodefinebasiccosts,bothfoodandnonfood itemsshouldbedeterminedbycollectingpricedatainparticularlocalities.The ExtrapolatedFoodBasketApproachshouldnotbeused. 4. Foodcostcalculationsshouldtakeintoaccountdifferentcostsassociatedwithwhether ornotworkerseatinfactorycanteens. 5. Thehouseholdparametershouldbecalculatedasanaveragehouseholdsizebasedon interviewswithworkersinordertoappropriatelyreflectdifferenthousehold structures. 6. Remittancestoruralhouseholdsshouldbeincludedasabasiccost,basedon interviews. 7. Anylivingwagefigure,oncearrivedat,shouldbecontextualizedwithincurrentlabour laws,thewaysinwhichtheyareenforced(ornot),andtheparticularsocialcontextin Chinathatincludesmigrantworkersandthemanydiscriminatorypracticestheyface. 22