According to a report on 2011 business turnover and salary adjustment released by the online human resource service provider 51job.com, 89 percent of employers said that they will raise all of their employees' salaries by 8.4 percent on average, the highest since 2008, the China Business Times reported.

The inflation hike since the second half of last year brings about two striking changes to the salary market. One is an influx of minimum wage hikes in Beijing, Shanghai, Guangdong, and other 27 provinces. The other is the planning of nationwide salary increases among companies. Though the comparatively developed coastal areas took the preemptive, the less developed regions are more notable in the range of wage increases. Some companies already have increased salaries and most are preparing to increase salaries.

The income gap is widening continually in China. The residents' income just accounts for a small portion of national income, lagging far behind revenue growth. In the factor market, wage income is much lower than capital gains and management gains. The disproportion of wage income against GDP is killing the incentive to produce. The income gap is widening between industries, the general staff and management teams, as well as rural and urban areas.

China's widening income gap may cause various social conflicts that undermine economic development and constrain economic restructuring. China's consumption-based economic developing course cannot be bypassed, but the disparity of wealth is choking the increase of spending power. Additionally, the imperfect social security system, high housing prices and rising commodity prices add to the difficulties for China's consumption-based economic restructuring.

The government is determined to reform its income distribution system by significantly improving the income of low-salaried earners, expanding the middle-income groups and moderately limiting the income of high-income earners. In the meantime, the call for reforming the income distribution system is getting louder. The demand for revenue and wage increases for individuals is strong. Inflation since last year has led to the minimum wage rising in most of the provinces and has also pushed the wage-increase tide for companies.

However, it is not as easy as simply raising salaries. How to distribute the raises, how much and to whom are complex questions that must be answered. I believe that this tide of wage increases in general should be in accordance with China's reform on the income distribution system.

First of all, the low-income industries should take the lead in carrying out the wage increases and give more. Industries with higher-than-average income should give less wage increases or no wage increases at all.

Secondly, instead of increasing the wages of senior management—whose wages are already extremely high—the wage increase should be primarily for general workers and workers at the production line who have had low wages for a long time.

Finally, the wage increase should focus on the basic wage and seniority wage instead of the so-called performance-related pay, which is very flexible. Some companies increase salary according to the administrative rank. In this way, there is not much left for the general staff.

It is also an opportunity for the government to narrow the income gap by working out guidance on wage increases that requires companies nationwide to focus on the general staff in this round of salary increases.

(This article was written in Chinese and translated by Li Huiru.)

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