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Huang Mengfu: SMEs Salary Impacts Social Stability

ACFIC Chairman Huang Mengfu said that it has become an inevitable trend to raise the workers" income with the continuous rise of the country"s economic strength. He urged the government to provide effective support to small- and medium-sized enterprises (SMEs)to improve their space for growth, a pre-requisite for sustained growth of the workers" salaries.

Huang made the remarks in Zhejiang Province where he led a seniorofficial team to investigate the environment for the growth of small- and medium-sized enterprises (SMEs) and the mechanism for normal growth of employee salaries between June 27 and July 2.

The investigators had a number of briefings with local government leaders, executives of SMEs in the high-tech, service and labor-intensive sectors, leaders of chambers of commerce, local and corporate labor union leaders, and front-line workers in various sectors in Hangzhou, Wenling and Ningbo cities.

The team consisted of officials and researchers of ACFIC, the Ministry of Industry and Information Technology, the CPC United Front Work Department, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Human Resources and Social Security, the State Administration of Taxation, the All-China Federation of Trade Unions, and the China Academy of Labor.

Huang made several speeches during those briefings. He said that Zhejiang, especially Wenling and Ningbo, has setvaluable precedents and accumulated experiences and expertise in settling employee salary and labor-capital disputes through a collective negotiation mechanism.

"We hope to promote their advanced experience and help other SMES to establish a normal labor-capital relationship and achieve harmonious growth. We also wish to find out in which aspects the government can increase support of the SMEs in order to foster a better environment for their growth."

Huang said that with the rise of China"s economic power, raising the income of workers have become inevitable. The central government and the party leadership has called for raising the ratio of labor in the distribution of productive elements and increasing the income of workers.

SMEs account for 99 percent of the country"s total number of enterprises and absorb over 80 percent of the country"s labor.

He stressed that salary growth for SME employees has a direct impact on the growth of the SMEs, rural and urban income and social stability. "It is of great significance for the government, trade unions and entrepreneurs to work together to build an SME employee salary growth mechanism with Chineese characteristics during the country"s 12th Five-year Plan for National Economy and Social Development.

"The issue of raising the salaries of the employees is closely related to improving the SMEs" productive and operational environment and boosting their growth," Huang said. "We should find a way to increase support to SMEs and improve their business operations; that"sa prerequisite for stable and sustained salary growth of SME employees."

The Chairman pointed out that the economic development model based on low costs can not be sustained and suffers from trade barriers. Therefore, it is time to turn the economic engine from reducing labor costs to boosting domestic demand, especially consumption. "To increase consumption of the ordinary people is not just to take out the money from their pockets, but also to increase the money in their pockets."

On the problems faced by the SMEs, such as heavy taxes and difficult financing, Huang acknowledged that some SMEs, especially small businesses, are still facing difficulties caused by old social concepts and bad systems.

But he said he is confident that a series of pro-SMEs policies and measures introduced by the government in recent years, including the "new 36 measures" published earlier this year to encourage private investment, will improve the market, policy, legal and social environments for the development of SMEs in the future.

However, under the current situation where large-sized enterprises enjoy advantages in self-development and resource distribution, it will be extremely hard for the SMEs, which are disadvantaged in the market economy, to survive in the competition, should they not get special favorsas far asgovernment policies and resource distribution are concerned.

"Therefore, the government, especially the fiscal and taxation authorities, really have to be serious about allocating more productive elements and policy element to SMEs, so that they can prosper and their employees can get rich quickly," Huang said.

Huang also explained the strange phenomenon of a poor people in a strong country. He said that the income distribution between the government, enterprises and individuals is twisted, with a steady drop in the renumeration for labor as favorable income distribution policies and reforms had largely left out most SME front-line workers.

Huang stressed that to lift the income levels of lower-bracket salaried people, the government first and foremost, has to attach great importance to the growth of SMEs, understanding their irreplaceable role in creating jobs and improving people"s lives, instead of regarding them merely as a taxing cow.

"The government should be serious about tax reduction for SMEs, especially the small and micro enterprises, reducing their burdens, boosting their momentum for future growth, and leavinga bigger profit margin forpotentialsalary increase of their employees."

On the other hand, the entrepreneurs should realize that continued rise in labor costs will be a long-term trend and that salary hike is a natural result of corporate growth, Huang said.

"To increase its competivity and achieve stable sustained and healthy growth, a company has to change its growth model. Intead of relying on low labor costs, it has to continuously restructure, upgrade, and innovate, improving its management, operation and high-tech levels. Good profits will guarantee the steady and sustained increase in employee salaries."

Huang also noted that salary increase is based on the growth of labor value, which is closely connected to the rise of labor quality. Therefore, it is important to establish a correct concept about salary in the society and encourage employees to keep learning and improving their profesional qualifications, abilities and ethics. To this purpose, he urged both the enterprises and the authorities to strengthen professional training of the workers.

Summing up, Huang said a new working relationship with distinct Chinese characteristics is marked by thegrowth of the enterprises and their employees, as well as a reasonable profit distribution based on mutual wins.

To establish an effective mechanism of salary growth and harmonious working relationship, the government, the labor unions and the chambers of commerce have plenty of work to do.

Firstly, the government should play a leading role in the establishment of a colletive negotiation mechanism for salary; use taxation, social security and other measures to guide and influence the result of the negotiation; ensure that the growth of minimum salary will be faster than the average salary level; use economic growth, consumer price index, unemployment rate and other indices as the basis for setting the minimum salary; enhance the timeliness and reference value of the salary reference line.

Secondly, the functions of the labor unions should be strengthened. As the organizations of the workers, on the one hand, they should negotiate with the enterprises on behalf of the workers and their interests, and on the other, mediate the disputes about the collective negotiations and implementation of the collective contracts, so that a harmonious working relationship is maintained.

Regarding the difficulties of establishing labor unions in individual SMEs, Huang suggested the organization of regional or professional labor unions in townships, streets and communities with many SMEs.

Thirdly, the chambers of commerce, which are the organization and representative of entrepreneurs, have a big role to play in collective negotiations. To that purpose, small and disparate enterprises can establish regional or professional chambers of union, associations or street federations.

Huang hailed the salary collective negotiation mechanism in Wenzhou and Ningbo as a good practice. "It is a cross between market orientation and government regulation, between corporate decisions and equal negotiations, conducive to a win-win capital-labor relationship, a reasonable and orderly growth of employee salaries, and the establishment of a new working relationship with Chinese characteristics. It shows that we can avoid strikes, bankruptcies and other extreme measuresoften witnessed in Western capitalist countries to settle salary disputes."

But for the mechanism to work, the government, the labor unions and chambers of commerce must do their own jobs, work together and cooperate, he added.

To sum up, Huang said ACFIC is a people"s group and chamber of commerce under the leadership of the Party, with private enterprises and people from the private economic sector constituting its main body. It is its important duty to participate in the salary collective negotiation mechanism and promote a harmonious working relationship.

"The federations of industry and commerce at various levels should proactively guide the enterprises and their employees to realize mutual development, encourage the enterprises to share profits with their employees, promote mutual understanding, respect and compromise between the capital and labor in this tri-party negotiation mechanism, realize capital-labor cooperation, and make positive contribution to the establishment of an employee salary growth mechanism."