parallels the same dearth in manufacturing earnings data from many countries. For reasons of practicality, if a country does not include earnings for employees in small manufacturing units in its earnings data, the Bureau also excludes the employees and compensation for these units from its estimates of hourly labor compensation in manufacturing.107 Self-employed workers in manufacturing also are excluded from the Bureau’s estimates. Using data from manufacturing censuses, the Bureau has researched the effect of excluding such earnings and found it to be small.
Estimating total 2002 compensation in manufacturing
To estimate total compensation for China’s manufacturing employees, it is necessary to add to the reported earnings the other components of total compensation, including social insurance payments paid by employers on behalf of employees, as well as other payments to or for employees that are not included in the earnings data.
In the urban areas, employers pay considerable sums for social welfare benefits on behalf of their employees, above and beyond the employees’ earnings. China’s cities today have built, or are in the process of building, municipal social insurance funds and housing funds to which both employers and employees are required to contribute each month.108 There are six kinds of funds: an old-age pension fund, a medical insurance fund, an unemployment insurance fund, a workers’ compensation fund, a maternity leave fund, and a fund in which money is set aside for each worker by name--money that the worker can use to help buy an apartment. These monthly payments by employers to city
governments are mandatory, and stiff penalties are specified for noncompliance,109 noncompliance is rampant and penalties are rarely enforced.
The payments deducted from employee earnings for the six public funds and remitted to city governments are included in the reported earnings data (see exhibit 1), but the part paid by employers is excluded.110 Legally required payments to government social insurance and employee benefit programs are included in the BLS concept of compensation,111 so, in order to adjust the reported manufacturing earnings to include legally required employer social insurance payments and other labor compensation costs, one needs to know the overall percentage of the total earnings bill that urban manufacturing employers paid in 2002 for social insurance and required housing fund payments, as well as other employee benefit payments. China’s Ministry of Labor conducted a survey of 11,704 urban enterprises in 51 large and medium-sized cities throughout the country and collected all relevant worker compensation data from these organizations for the year 2002.112 This article uses the results of that large survey to estimate average labor compensation costs in urban manufacturing above and beyond the reported earnings data for 2002 given in table 6. On the basis of the results of this Labor Ministry survey, the reported 2002 annual earnings should be increased by an amount equivalent to 53.8 percent of earnings to estimate the following labor compensation costs (expressed as a percentage of urban earnings) actually paid by employers: 113