Recruiting in China

Old Yang, a 55-year-old security guard in a residential complex, has been counting the days until his next paycheck. Effective this month, the minimum wage in Shanghai rises to 1,620 yuan (US$261) a month from 1,450 yuan.

Like most low-wage workers in the city, Old Yang is finding it hard to cope with rising prices for groceries, medicine, transport and the other basic necessities of life.

Sitting in the gate room of a residential compound on Anguo Road in Hongkou District, a cigarette glowing in his left hand, Old Yang said “food, transportation, tuition, water, gas and power bills. You have to pay for everything with the minimum wage.”

Old Yang lost his job during the global financial crisis in 2008 and found work as a security guard through a government-sponsored re-employment program aimed at helping jobless people in their 40s and 50s.

“Many jobless people chose to stay at home after the crisis,” Old Yang said. “I chose not to because my family needs money and I want to get a pension after retirement.”

His wife works part-time to help defray the cost of a son in college.

On March 29, the Shanghai government increased the minimum monthly wage by 11.7 percent, or 170 yuan. The minimum payment for part-time employment was lifted to 14 yuan from 12.5 yuan an hour, according to the government notice that took effect on April 1.

Nationally, Shanghai has the highest minimum wage of all 13 provinces and major cities in China. Its most recent rate of increase, however, isn’t as high as in some provinces, such as Jiangxi Province, which showed the biggest increase this year at 41.4 percent, according to People’s Daily.

The minimum wage in Shanghai has more than quadrupled, from 352 yuan, in the last 15 years. By 2020, China aims to double the per-capita income of both urban and rural residents from 2010 levels and narrow the gap between the rich and poor, according to a report from the 18th National Congress of the Communist Party of China that ended last November.

“The minimum wage will also be doubled by that time,” said Jennifer Feng, a senior human resource analyst with 51job.com, a Nasdaq-listed headhunting firm. “But you have to remember we are talking about net income. Actual take-home pay may be less, when social insurance fees and other mandatory costs are included.”

In its Five-Year Plan for the period ending 2015, the State Council, China’s Cabinet, stipulates annual increases of at least 13 percent.

“I think the latest increase is a balanced result, which takes into account the rising cost of living and the payroll tolerance capacity of employers,” Feng said. The risk, she said, is that employers, especially in manufacturing, may lay off staff or recruit lower-paid workers to replace experienced ones in order to lower their operating costs.

There were a dozen security guards in Old Yang’s residential compound last December. Now, there are only six.

“Maybe our boss knew he couldn’t afford so many of us, anticipating that the minimum wage would rise, so he fired them earlier,” Old Yang said.

He said his employer tends to hire local people like him because their social insurance fees are paid for by the government and the neighborhood committee under the re-employment plan.

Still, migrant workers are also commonly hired as security guards and cleaners in Shanghai. One such colleague of Old Yang’s, surnamed Zheng, lives in the basement of a high-rise in the housing complex, along with his wife, who works as a cleaner. Zheng, a native from central China’s Henan Province, declined to give his full name.

Zheng said the accommodation is free and he doesn’t have to pay utilities.

“Rent can gobble up nearly half of the minimum wage in Shanghai,” Zheng said. “The city is really too expensive to live in.”

For employers, the picture is mixed. A rise in minimum wages tends to make higher-paid workers think they should get raises, too. Feng said as wages rise, many employers are caught in a bind. Amid slower economic growth, they are under pressure to make more money, and wages account for a big chunk of operating cost. She suggests the government help share the burden by reducing business taxes or by defraying part of the cost of hiring people.