Average monthly wages should rise by 17 per cent starting July 1. Increase should help reduce labour shortages.

Shenzhen (AsiaNews/SCMP) – Shenzhen's minimum wages will rise by more than 17 per cent from July 1, in an attempt to reduce social unrest and ease the city's persistent labour shortage.

The minimum wage will rise from 690 yuan to 810 yuan in the inner city and by 120 yuan a month to 700 yuan in the suburbs. Those working outside official hours are entitled to at least 4.66 yuan more per hour.

This is the second time in two years Shenzhen authorities have adjusted the minimum wage, and the Shenzhen Labour and Social Security Department is expected to review it again next year.

A senior member of a government think-tank said the move was mainly designed to reduce social unrest and implement President Hu Jintao's "human-based administration principle".

"It has something to do with the labour shortage problem. But the main reason is because we believe we need to better distribute wealth and take care of people at the grass-roots level," said Guo Wanda , of the Shenzhen Development Research Centre.

Some investors said the increases could force labour-intensive factories out of Shenzhen. Sa Shing-sik, general manager of the Hong Kong-based Macro Watch Industry, said some watch manufacturers might have to leave the city to remain competitive.

Shenzhen is the world's biggest manufacturing centre for watch and clock parts, and Mr Sa said the increases would squeeze out some small players. "Those factories that mainly produce low-end products will be most affected. They are labour-intensive and the profit margin is very small. The increase will push up their costs," he said.

But Mr Guo did not expect to see a mass exodus of factories. "The Shenzhen government is actually happy to see those low-end factories moving out. Our land supply is limited. We need to focus on developing the advanced manufacturing industry," he said.

He said pay rises alone would not solve the labour shortage problem. "We lack skilled workers, not regular labour. I doubt the minimum salary increases can solve that problem."

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