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186 31 Bonuses Should Reward the Diligent and Penalize the Lazy1 August 13, 1988 Factory directors shouldn’t rely only on bonuses to motivate workers. Rather large bonuses are currently being paid out in Shanghai, which I’m afraid leads the country in this regard except for a few other places. Some say that because Shanghai is making great contributions to the nation its bonuses should be high. This issue needs to be properly understood. Although Shanghai has relatively high labor productivity, this is a result of history and is not entirely due to Shanghai’s abilities. The fact is, first, we rely on cheap raw materials from other places; second, the central government gives us a great deal of support and large tax rebates; and third, quite a lot of industrial facilities were located in Shanghai to begin with, so the foundation here is quite good. Therefore the argument that “Shanghai’s labor productivity is high so bonuses should be high” is false, nor would people across the country agree with it. In the first half of this year, Shanghai’s wages and bonuses increased by 21.6%, and of that figure, bonuses rose by over 30%. That level isn’t high just this year—for the past few years it has consistently been over 20%. The price index rose by 18% in the first half of this year. After deducting for this, wages and bonuses still increased by 3.6%, whereas labor productivity declined by over 1%—this is contradictory to the laws of economics. If we keep on going like this, with labor productivity decreasing, production stagnating, fiscal revenues falling, yet still handing out so much in bonuses, Shanghai won’t be able to sustain itself. Why does everyone now feel that bonuses are too small and that incomes aren’t keeping up with price increases? I would point to the following factors: The first is inflation psychology. People only tend to see prices going up, not wages and bonuses, nor are they likely to believe that the increase in wages and bonuses has surpassed that of prices. We must suppress this inflation psychology and steady people’s minds. Otherwise, everyone will feel panicky, start 1. This is part of a conversation between Zhu Rongji and some enterprise representatives who were delegates to the Shanghai People’s Congress and the Shanghai People’s Political Consultative Conference. Zhu_Shanghai Years_1987-1991_hc_9780815731399_i-xii_1-620.indd 186 12/26/17 12:00 PM Bonuses Should Reward the Diligent and Penalize the Lazy 187 withdrawing deposits from the banks, and a buying spree will ensue—that would be awful. We must adopt countermeasures but can’t rely on handing out more money. If we pay larger bonuses but there is nothing [to buy], the bonuses won’t have any effect. Second, living standards have indeed declined for a number of employees. For various reasons, the rise in their wages and bonuses has been lower than price increases, but they form only a minority. The third factor is competitive psychology. The excessively high wages at hotels and joint ventures are affecting the stability of employees at state-owned enterprises (SOEs). We’ve recently resolved to control bonuses at the Jinjiang Group and other hotels, and gradually narrow the income gap between them and other sectors. The high wages at joint ventures aren’t the work of the foreigners —they can be traced to the Chinese who wanted to make more money for themselves. In the future, many enterprises in Shanghai will be collaborating with foreigners in a variety of forms. If joint-venture wages are too high, foreigners won’t want to come here to invest, and in the end we’ll only have hurt ourselves. I’ve already asked the Municipal Foreign Investment Commission to come up with a general policy—no matter what, we must get wages at joint ventures under control. The [unjustifiably] egalitarian way bonuses are currently paid out is also of concern. Those who work more don’t get more, those who work less don’t get less, and loss-making enterprises just keep handing out bonuses that fail to have the effect of rewarding the diligent and penalizing the lazy. At the Minhang District, this is how things are done by the Big Four.2 They all talk things over when paying bonuses—each one pays roughly the same amount, and they’re afraid to offend the workers. If we go on like this, if we don...

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Additional Information

ISBN
9780815731405
Related ISBN
9780815731399
MARC Record
OCLC
1013519277
Pages
400
Launched on MUSE
2018-02-13
Language
English
Open Access
No
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