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CEES Report: Chinese Enterprises Are Facing Challenges of Rising Labor Cost

June 28, 2017

"China Employer-Employee Survey (CEES)” report was released on June 20 in Wuhan University. The report shows that labor cost and market demand are the major factors affecting the development of enterprises in recent years. A large number of enterprises are facing challenges of rapidly rising labor cost and trying to cope with the difficulties.


CEES was jointly launched by the Institute of Quality Development Strategy, Chinese Academy of Social Sciences, Stanford University and Hong Kong University of Science and Technology. The survey was carried out in Guangdong and Hubei provinces during 2015-2016,involving 1208 enterprises and 11366 employees.


“Among employees who have worked for more than 2 years, the actual wage of manufacturing workers in Guangdong increased by 8.3% during 2014-2015 while the wage of those in Hubei went up by 5%; According to the data from two rounds of survey in Guangdong, the actual salary of new employees in 2015 increased by 14.5% than the previous year, much higher than the wage growth of employees who have worked for more than 2 years. This may be the result of employment of more skilled employees or competitive employment market”, said by Prof. Hong Cheng, Director of Management Committee of CEES and the Dean of the IQDS.


CEES found that the actual wage of skilled workers grew faster than that of non-skilled employees, an increase of about 2%;Employees with different education levels and positions were paid differently. The wage of staff with university degree and the above was 27% higher than those with high and middle school degrees. The wage of senior managers is 66% higher than that of front-line workers.


The survey found that the number of employees in manufacturing enterprises in Guangdong decreased by 6.3% and those in Hubei dropped by 3.3%. The decline in the number of employees were mainly non-skilled workers, most of whom were front-line workers, while the technical designers were decreasing at a faster speed. Prof. Hong Cheng believes the employment structural change reflects that companies are constantly improving their skills in the production process.


In addition to adjusting the structure of labor forces, Chinese manufacturing enterprises are making efforts to promote industrial technological upgrading and innovation to meet the challenges. According to the CEES report, 8% of enterprises used robots, including 10% in Guangdong and 6% in Hubei. 40% of enterprises used automation equipment,  the value of which accounted for 17% of the total equipment value. The research and development investment of enterprises was also on the rise.  The state-owned enterprises, export enterprises and high-tech enterprises invested more in this area; Also, the enterprise management and product quality were improving. The proportion of new product sales was rising; Moreover, the Chinese government also began to focus on innovative development policies, including subsidies and other preferential strategies to promote the development of enterprises.

  

At the release conference of CEES report, Prof. Loren Brandt from the Department of Economics, University of Toronto, Prof. Shang-jin Wei from Columbia University, Chief Economist Mr. Lixin Xu of World Bank and other experts and scholars said that the report helped present a more comprehensive development blueprint of China's manufacturing enterprises and reflect the great value of CEES. The CEES report will provide more data and support to empirical research and policy development.