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Economy

Chinese factory wages stall as US tariffs start to bite

Less overtime and holiday work impacts paychecks

More Chinese companies are reporting less employee turnover as wages remain stagnant.   © Reuters

SHANGHAI -- Chinese wages have flatlined at many of the nation's manufacturers as a result of an economic slowdown brought on by a trade war with the U.S. and slumping global demand, a shift that has discouraged workers from switching jobs.

Only four out of 37 companies surveyed by Nikkei reported monthly take-home pay had risen from a year earlier, and one company said compensation, including employee benefits, had improved. The rest of the businesses -- more than 80% -- reported static or falling wages.

Workers are encountering fewer opportunities to supplement their base pay with overtime and holiday work. In addition, 40% of the companies said they are cutting back on hiring.

The survey, conducted between Sept. 18 and Sept. 28, is based on interviews of companies headquartered in Shanghai and in the Jiangsu Province cities of Wuxi, Suzhou, Nanjing and Kunshan. The wages were limited to production line positions.

The stalled wages have been reflected in a diminished number of job seekers and job recruiters. At a recent job fair in Wuxi, less than 20 businesses occupied the 46 booths.

"The number of companies that came here has obviously decreased from the same time last year," said a venue organizer.

Many booths were empty at a job fair in Wuxi on Sept. 25. (Photo by Yusho Cho)

There was a similar turnout at a job fair at Suzhou Industrial Park. "We are looking for just over 10 recruits," said a representative from Guangtai Precision Pressing, a maker of computer components. "Last year we hired 30 to 40 people."

Several businesses decided to stop recruiting altogether during the morning hours. "There are more than a few migrant workers who are returning to their homes because of the inflation," said a person from a printer circuit board maker.

The low turnout of job seekers may be attributed to wages failing to rise. Thirty out of 37 companies say that pay has remained unchanged from a year earlier, while another two reported declines.

Factory workers often receive a low base pay, barely above minimum wage, so they depend on overtime and holiday pay to be properly compensated.

Jiangsu Province raised its minimum wage in August last year, and Shanghai followed suit in April. This prompted many companies to raise their base pay, but the decrease in available overtime and holiday pay kept paychecks at a virtual standstill.

The monthly take-home pay at Grace Fabric Technology, a Shanghai producer of glass fiber, has dropped to about 4,500 yuan ($629) from over 5,000 yuan. The company says there is less overtime because smartphone manufacturers, hit especially hard by lower global demand and the U.S.-China trade war, have cut production.

Suzhou-based Unimicron Technology shrank its workweek to five days from six days, causing monthly take-home pay to sink to 4,500 yuan from between 5,500 yuan and 6,000 yuan.

Many companies interviewed make parts for computers and smartphones, or are in the automotive industry. Businesses have held back on capital expenditures after the economic slowdown came into sharp relief in the latter half of last year. Purchases of smartphones and automobiles have fallen short of last year's numbers.

There is little headroom to raise wages. Excluding financial groups, the net profit of listed mainland enterprises dipped 2.5% on the year during the first half of this year.

The effect of the trade frictions between the U.S. and China is steadily materializing. Wujiang furniture maker Man Wah has sustained a blow from the punitive tariffs levied by Washington. The company said the monthly take-home pay has remained flat at about 4,000 yuan.

Out of the 37 companies interviewed, 16 said they are tightening hiring. A survey of 1,200 companies by staffing platform liepin.com found that the number of employers reporting lower employee turnover jumped 25% in the April-June quarter compared with the previous quarter.

This indicates a labor market unwelcoming to those looking to change careers and attain a bigger paycheck. The depressed wages appear to be spilling over to private consumption. The growth in retail sales have recently slowed down to less than 8%.

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