Photo: flickr: Harold Groven
Communist countries are supposed to be dedicated to their workers. But as Dr. Ed Yardeni points out in his blog, it’s incredibly hard to be an average Chinese factory worker, butcher, baker, or candle stick maker.It’s even harder to be a migrant worker. And there are 120 million of them.
What you need to know about them is this— migrant workers are a huge are a liability to China, and if things don’t change, they could topple the entire system.
Picture it. It’s around 30 years ago and you’re living in a Chinese Village. You’re incredibly poor, you have no brothers or sisters to support you if you can’t find a job (one-child policy), plus your parents are getting old. So you move to the city to jump in on the manufacturing boom.
Problem is, you get paid next to nothing. You have no benefits. Worst of all, there’s the “hukou” system, which defines where a Chinese person is allowed to live and whether or not they are a city or country resident. If you’re from the country and working in the city, you’re not entitiled to simple benefits, like education for your children.
So obviously, you’re disgruntled.
Back to reality.
The government knows the average Chinese worker is disgruntled, so they throw them carrots, like 15% to 20% wage increases every now and then. Since there are so many migrant workers, that can be quiet a lot. Giving them social benefits adds up as well.
But, if the Chinese government wants to move from an investment driven, to a consumer driven economy (as they’ve said over and over again), this is what they have to do.
And to keep the migrants happy, they have to do it fast. Remember: China averages 274 protests per day.
This is a delicate dance, balancing investors and the needs of the worker, and it all may be happening faster than the government would like. They don’t want to scare off investors with rising costs before consumer demand is healthy enough to sustain the country’s economy on its own.
Because of these carrots, the cost of doing business in China is rising. Shanghai Daily reports that the cost of doing business in the city is the highest in the country because of welfare costs like pensions and medical benefits.
Still, if the government takes away wage increases and benefits, the whole “harmonious society” message they’ve been touting to keep everyone in line could go out the window. We’re talking about massive political drama.
You see, the Chinese people expect growth and wealth for everyone. They believe its coming, and that’s why they tow the line. This is a social contract between the people and the government, the one that gives the government legitimacy. And if the people don’t believe the government is holding up their end of the bargain, the people will let go of their end too. That means chaos.
Especially if 120 million people stop believing.