From Cover, issue no. 367, May 12, 2008
Translated by Zuo Maohong
Original article:[Chinese]

Some eight million Chinese public servants may see their pay slips changing, for better or worse, if a public sector salary reform that aims to close the income gap between regions and institutions is realized.

The EO has learned that the planned reform would look into standardizing the allowances and subsidies package, which has increasingly become a major part of public servants' income, especially in more developed regions.

The reform would also target grey and side-incomes, of which staff in certain public organs apparently have more such opportunities than other counterparts.

The reform plan had come under discussions spearheaded by the Ministry of Finance (MOF), and included the Ministry of Human Resources and Social Securities (MHRSS), according to an official from the MHRSS.

The plan to regulate public servants' allowances was tipped to be carried out by July 2009. In addition, a scheduled salary increment mechanism to raise wages in accordance with the Consumer Price Index (CPI) was also in the pipeline. 

Equalizing Public Servants' Income
In-circle sources told the EO that the reform measures would apply a tactic of "leveling the peak to fill the valley", meaning to channel resources from the top-end to lower-end.

The measures would include setting a bar for allowances and setting collections on allowances and subsidies to feed adjustment fund, in the hopes of narrowing the income gap between developed and backward regions.

The reform would be a follow-up to the new public sector salary scheme introduced in 2006. First established in 1956, the allowance system had boosted public servant income greatly, especially after 1993, when such payments were permitted to be made outside of the formal salary system under the jurisdictions of local levels.

Two years ago, the complex web of allowances at both central and local governments was simplified, cutting down on grey areas and making allowances issuance more transparent.

The government had then set the allowance control lines between 250,000 and 400,000 yuan, but then allowed respective local governments to decide on the bars based on their financial capacities.

In some provinces and cities, the allowance criterion was regarded as "confidential" by top officials. All that most staff knew was part of their welfare package and allowances were wiped out.

The previous move was said to have led to "shrinking" incomes for staff at the more "profitable" government agencies, such as tax, judicial and customs institutions. In the more developed regions like the east coast, if based on the ceiling set for allowances, some would lose up to between 30,000 and 70,000 yuan yearly, or a drop between 2,500 and 5,800 yuan in their monthly salary.

Consequently, some government institutions had looked for other means to compensate their staff, thus leading to unclear payments.

Regional and Work Load Differences
Li Shi, who heads the Beijing Normal University's Income Distributions Research Center, said the previous round of reform had attempted to close the gap between institutions but the new reform should focus on regional differences.

For example, Shanghai topped the list of public servants' income in 2007 while landlocked provinces like Guizhou and Gansu ranked at the bottom.

A public servant from northwestern China recalled a business trip to Shenzhen, where he learned that his counterparts of the same ranking there enjoyed a monthly income of 14,000 yuan, compared with his 1,300 yuan. The sharp contrast naturally depressed him, he said.

He noted that the disparity mainly arose from allowances, as their basic salary was the same—around 1,000 yuan. Yet the Shenzhen official had far more perks, such as over 1,000 yuan in car parking allowances.

To narrow this gap, there had long been calls for a local additional allowance system, which would reflect the differences in economic development and cost of living in various regions.

The implementation of this system was mentioned in the 2008 priority work areas of MHRSS, and the new round of reform was aimed at paving the way for this system, the EO learned.

Li provided suggestions on how the system should work. He used the case of mid-ranking officials in the west and east of China with an income of 2,000 yuan and 5,000 yuan respectively as example.

Li said the initial 3,000 yuan differences between the two might be cut down to 2,000, if minus the higher cost of living in the east. He stressed that the disparity of 2,000 yuan should be resolved by having a local additional allowance for the official in the west.

However, some experts suggested that job responsibilities and intensity should also be considered when drafting policies on salary. They argued that despite the same ranking, the work load of public servants in a county-level agency and a central government body could differ greatly, and thus should be paid differently.