Salaries Under Socialism (China, Soviet, Germany...)

Total Compensation

Americans are often shocked to learn that in socialist Germany the unelected chancellor (Germans cannot elect their leader, the party does) barely takes home a monthly salary of 19,477 euros ($20.7k) before tax, less than a nurse anesthetist in Texas. What they slowly realize however, if they care to look into the matter further, is that a single trip the chancellor takes with one of his five airplanes or hundreds of car convoys bills in at a whopping five to ten times his annual income, easily, and that his new office building rolled in at 777 million euros ($822 million), rent-free. As long as he stays on the socialist government’s roster, officially the chancellor is just another humble paid employee, but also officially, of course, his chancellery throws about around 1.2 billion in lifestyle euros a year. Since America liberated the socialist Germans from national socialism, Berlin has adopted a more democratic socialism, and raised the average income of its top officials, if only to not arouse suspicion. But do you know which country has always been fascinated by socialism and has now (almost) perfected salaries under socialism? Not the Soviets, no — the Chinese: The Chinese perfected German socialism minus the French Revolution but with Confucian characteristics.

Li Keqiang, a former premier of China (second in command), once vowed to “tackle corruption” and “clear government,” which includes — mind you — most schools, hospitals, banks, universities, companies, public transport, the courts and the police! In unison, Li also wanted to “double the average income,” and now is the time, I think, to elaborate on the fact that, technically, China still has no concept of “full salary” (some call it living wage) in the sense it developed in the West alongside the idea of human rights.

Just like in Europe in the feudal days, the typical Chinese public servant today drags himself around with little or no money, and thus stays close to his master. In the past that was the emperor, now it is the party.

Corruption isn’t just political, it’s now personal: It is the people who feel exploited, disrespected, not valued, not paid enough, and who feel truly frustrated, hopeless and sorry for their families, so they go out and take what they can. The Chinese do not trust each other anymore.

Teachers, students, office clerks, officers, professors, even governors, no one gets more than 30 to 40 percent of the living wage they would need to pursue their actual duty full-time, letting alone caring for themselves, or raising a family. The rest, they have to “earn” by other means, often by hidden perks or through abusing their power; and if one thing can be said about the Chinese elites after the Cultural Revolution is that they are survivors. Let us first talk about the concept of 发票fapiao (invoice/receipt).

In a typical Chinese environment where everyone lacks money but the mother lode is rich, the only way to get the money out of her register is by handing in a fapiao for exchange — an invoice for cash reimbursement. Experienced senior cadres will present fapiao for their business trips, stationary, electronics, watches, public transport, karaoke, dating, gifts and, most important, always lavish and excessive food for their business partners and friends.

That’s why there are so many unnecessary conference centers, high-end hotels, KTVs (karaoke bars), and restaurants that are offensively costly (even for international standard) and outright unaffordable (if it were to be paid from one’s own pocket). The same is true for the vehicle fleets and housing. A private 60-sq.- meter flat in Beijing costs at least 10,000 yuan per month ($1300). But the wage of a senior judge or professor is just 7,000 yuan per month before tax ($966); so he often depends on free housing from the government. Needless to say, those flats are highly competitive, and only guanxi (connections) are known to speed up the process.

Most governmental institutions have built their own adjoined hotels, karaoke bars, massage parlors, and restaurants serving crab dinner, so that fapiao can be issued to the local bosses; a perfect symbiosis. They recently sacked an official in Zhejiang Province who brought in 832,200 yuan of fapiao ($140k); 20 times that of his actual “salary.”

Foreigners who wish to invest in China should first learn about the salary situation of the Chinese host, that the Chinese are paid poorly and that they must be corrupt for a living.

Thus the Chinese official will have to cash into the foreign investment for his private expenses in order to survive, and this isn’t a metaphor. Even if he cannot put his hands on the foreign investment, or receive gifts or bribery, he will explore all means of Chinese hospitality, conferences, shark fin lunch, and foot massages, thus will indulge the high-flyer life of the moment, all on his organization’s or the government’s bill. Naturally, the Chinese host will want to bring his friends into this, and lengthen the negotiations.

Foreign businessmen often assume that socialist China is low-budget, only to pay through the nose — every time. That’s because they compare average salaries in China — barely $700 a month. Had they studied the culture, however, they would have realized that those figures are not “full salary,” and that the foreign visitor, indirectly through the hospitality, is another source of income.

Everyone who worked in China has (often embarrassing) experience with corrupt officials, who earn less than they deserve, and much less than they feel they deserve; and thus transform into sly entrepreneurs.

How else could they afford cars, homes, furniture, luxury goods, Harvard education for their kids (you have no idea), or traveling abroad? Asking for salary is considered bad sport, and it is still a tradition in Chinese elite universities, for example, that doctors and post doctors live without meaningful income well into their forties (and intermarry) — a modern version of the imperial eunuchs: They live on allowance for campus food and subsidized on-campus lodgings.

Some Chinese commentators, and most foreign companies that operate in China, will argue that, according to the law of supply, there are simply too many Chinese on the market, making their labor cheap. Often, you don’t have to pay them wages at all; covering their minimum living existence is quite suffice; like the contracted migrant workers who sleep on bunk beds and shower only once a week.

To this I reply that we would still need to have some universal concept of “living wages,” just like we need to have a “concept of human rights,” because otherwise, simply put, China will never learn to respect human dignity, and may one day even decide that foreigners (the other 80 percent of the world) can be seen as “plenty and cheap” too. Already, we have Westerners lined up in China who are paid extremely low wages, yet who are often morally unprepared to triple or quadruple their income the way the Chinese do.

Foreigners should not work underpaid just “because the Chinese do,” and foreign CEOs certainly shouldn’t pay tribute and risk their good reputation for the dubious practice of being invited by some almighty party officials to a full-blown state dinner banquet, knowing that the official would not and could not pay for such acts of debauchery if it were to come out his own pockets.

Still others tell me that it has to do with Confucian values; that a humble wage was emblematic of the gentleman (junzi) who would find other ways to make the job “pay” anyway because the culture was inclined toward nepotism, entitlement, and taking advantage of officialdom.

Li wanted to curb all of it: “reduce the number of people on the payroll; stop excessive official overseas travels,” he said, and “no construction of government halls and buildings, less hospitality and fewer purchases of fleets of cars.”

What is China going to do with all that excess savings on money? Here’s an idea: Pay out a “full salary” so that the people will get an incentive at least to imagine a world without corruption.