Review of Radical Political Economics 1–14 © 2014 Union for Radical Political Economics Reprints and permissions: sagepub.com/journalsPermissions.nav DOI: 10.1177/0486613414542780 rrpe.sagepub.com Are Chinese Workers Paid the Correct Wages? Measuring Wage Underpayment in the Chinese Industrial Sector, 2005-2010 Zhun Xu 1 , Ying Chen 2 , and Minqi Li 3 Abstract This paper examines the labor compensations of the Chinese industrial sector for the period 2005-2010. We find that both the state owned enterprises and the non-domestic enterprises pay more than the living wage. But the domestic private enterprises pay substantially less than the living wage. We also find that all types of Chinese industrial enterprises pay the workers with wages that are substantially less than their marginal product of labor. JEL Classification: J30, P16 Keywords living wage, China, marginal product of labor 1. Introduction The Chinese economy has grown rapidly for about three decades, with an average annual growth rate of about 10 percent from 1980 to 2010. One of the key factors behind the economic surge is the healthy and educated but relatively cheap labor force in China. The low labor cost contributed to capital accumulation and economic growth, which in turn created job opportunities for the workers. Despite years of rapid economic growth, hundreds of millions of Chinese workers still work under sweatshop conditions, with little effective protection from the government and the official labor unions (Hart-Landsberg and Burkett 2005; Pun 2005; Weil 2008). 1 Although the 1 School of Economics, Renmin University of China, China 2 Department of Economics, University of Massachusetts Amherst, Amherst, MA, USA 3 Department of Economics, University of Utah, Utah, USA Date received: August 12, 2012 Date accepted: November 30, 2013 Corresponding Author: Ying Chen, Department of Economics, University of Massachusetts Amherst, Thompson Hall 838, Amherst, MA 01003, USA. Email: yingc@econs.umass.edu 542780RRP XX X 10.1177/0486613414542780Review of Radical Political EconomicsXu et al. research-article 2014 1 The miserable conditions of the Chinese working class have been widely documented even in the main- stream media; see a recent report in the New York Times on the brutal nature of Chinese capitalism: “In China, Human Costs Are Built Into an iPad,” http://www.nytimes.com/2012/01/26/business/ieconomy- apples-ipad-and-the-human-costs-for-workers-in-china.html. at UNIV MASSACHUSETTS AMHERST on December 12, 2014 rrp.sagepub.com Downloaded from