Manufacturing earnings and compensation in China: on the basis of published earnings data, estimated compensation ratios, and estimated hours, China's manufacturing employees averaged about 57 cents compensation per hour worked in 2002

Monthly Labor Review, August, 2005 by Judith Banister

(1) The companion piece to this article, "Manufacturing employment in China" (Monthly Labor Review, July 2005, pp. 11-29), noted that China's official statistics reported 83 million manufacturing employees at yearend 2002, but a variety of other available statistics strongly indicated that the actual number was more than 100 million.

(2) Banister, "Manufacturing employment in China," noted that China's official statistics reported 38 million city manufacturing employees at yearend 2002. Data on earnings are not available for 8.2 million manufacturing workers in the cities; of these workers, 2.6 million are self-employed. The Bureau of Labor Statistics does not include the self-employed in its comparative estimates of hourly compensation costs, which relate only to production workers. China's data cover both production and nonproduction workers.

(3) TVE's originally were established as collective economic units run by local governments in rural areas and towns. The purpose of TVE'S was, and still is, to employ small farmers and rural laborers in industrial or service occupations in locations not far from their family homes. This effort allows China's vast countryside to become modernized without necessitating massive migration from the villages to cities. In the 1980s, and especially from the 1990s to today, TVE'S shifted from public toward private ownership, and many foreign-funded enterprises became classified as TVE'S. Nowadays, in addition to including small local enterprises, the TVE category can include very large factories in industrial parks outside cities, as well as suburban, town, and rural factories. Companies have incentives to have their factories classified as TVE'S because required social insurance payments are low, statistical reporting requirements are minimal, and the companies receive many legal and tax benefits.

(4) To more closely approximate the purchasing power of Chinese manufacturing worker incomes in U.S. dollars, some type of purchasing power parity (that is, the amount of yuan required to purchase the equivalent of $1 of goods and services in China) would be needed. Although purchasing power parities provide a better measure of differences in relative price levels than do commercial exchange rates, there are still important limitations in using them to construct comparisons of worker income. For example, the purchasing power parities used may not accurately reflect the actual purchasing patterns of manufacturing workers, and the price data used to construct the parities may not correctly approximate the relative prices of many goods and services. For a discussion of the purchasing power of Chinese manufacturing worker incomes, see Judith Banister, "Manufacturing Employment and Compensation in China," on the Internet at http://www.bls.gov/fls/#publications.

(5) The analysis presented herein applies to the mainland of the People's Republic of China and excludes statistics for Hong Kong, Macao, and Taiwan.

(6) Banister, "Manufacturing employment in China."