Shanghai will increase its monthly minimum wage on 1 April from 1,280 yuan to 1,450 yuan, an increase of just over 13 percent, the Chinese media reported today [2]. The increase will make Shanghai’s minimum wage the second highest in the country after Shenzhen [3].

And in a further bid to protect the city’s poorest residents and strengthen its social welfare safety net, the municipality will raise the minimum subsistence allowance to 570 yuan per person per month for urban residents and 430 yuan per month for rural residents. This would give rural residents a guaranteed yearly income of 5,160 yuan, an increase of nearly 20 percent over current levels, making it the biggest single increase since the system was introduced.

Officials stressed moreover that the minimum wage excluded social security contributions, overtime payments and other subsidies, an implicit warning to employers not to reduce employee benefits as a means of clawing back costs incurred by the increase in the statutory minimum wage. As CLB’s most recent research report on the workers’ movement [4] shows, this has become an increasingly common practice amongst employers when faced with a mandatory increase in the basic wage of employees.

The increases to the minimum wage and subsistence allowance, announced just before the opening of the annual National People’s Congress in Beijing, clearly reflect the government’s concern over widening income disparity and the hardships faced by China’s poorest citizens as prices continue to rise.

Although there have been several increases in the minimum wage, across China, over the last two years, the gap between the minimum wage and the average wage in most jurisdictions remains substantial. The central government’s Minimum Wage Provisions, issued in 2003, suggest [5] that provincial governments should set their minimum wage at between 40 to 60 percent of the average wage. In reality, most local minimum wages are still around 30 percent of the average, if that.