Analysing wages and labour institutions in China: An unfinished transition

Abstract

The rise of wages in China would seem to indicate that the demographic dividend has reached its end. A more refined approach reveals, however, that the situation of Chinese workers has not really improved: even though real wages are rising, the share of wages in the nation’s wealth has not kept pace. The reason for this is China’s position within global value chains, where the employment relationship is not solely governed by the employer–employee power relationship, but by contractual relations established between ‘lead firms’ and subcontractors. This situation echoes labour institutional economist JR Commons’ concept of ‘competitive menace’ and analyses of the structural imbalance of power in the employer/employee relationship. We argue that despite the Chinese government’s desire for industrial upgrading and its intention to develop internal labour markets, Chinese labour institutions have shown significant resistance to change making it hard to envisage any shift towards a Fordist regime of capital accumulation based on a virtuous cycle of mass production and mass consumption. JEL codes: B52, J30