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Panic in China?

December 29, 2010

From the Financial Times: Minimum wage in Beijing is up 50% in 6 months.

Are they worried about a non-violent overthrow?  Is a revolution imminent?  Is the inflation rate there really 25%?  I do not have much insight into what is causing this change.

But the total wage is only $175 per month.  That means just a few months back the minimum wage was roughly $110 per month.  Beijing is an expensive city for real estate – more expensive than NY and certainly more expensive than Chicago.  You literally could not live on $1500 a year in Chicago – you would likely starve to death.

If this is like every other growing city in the world, people move there and get low paying job while living with relatives until they can find better jobs that allow them to get a place of their own.

If you read down into the FT article:

“In just the last three months we’ve already had to raise entry-level starting wages 60 per cent just to get people to come to a job interview,” said Jade Gray, chief executive of Gung Ho Pizza, a Beijing-based gourmet pizza delivery service. “With rising rents, the much higher cost of ingredients and now wage inflation, many businesses in the services industries are going to find it impossible not to pass on much higher costs to consumers.”

Overall, hard to tell what is really happening over there. On one hand, this is probably happening everywhere. On the other hand, this a business owner complaining about rising wages – they may as well report “The Sky is Blue.”

But under what circumstances does the government feel that raising the minimum wage 2X in 6 months is necessary?  I think the only reasonable circumstance is “Panic at losing power.”

 

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