(ECNS) -- China's competitive power has weakened as wage increases outpaced productivity growth over the past eight years, according to China's Finance Minister Lou Jiwei.
Lou told an economic forum that the current Labor Contract Law confers insufficient protection to enterprises, which to a large extent has reduced flexibility in China's labor market, National Business Daily reports.
The increase in wages over the past eight years were about two to three percentage points higher than the growth rate in productivity, it was added.
"It's too early for China to increase wages, " Lou said.
He explained that the current labor law discourages enterprises' efforts to enhance skills because employees enjoy legal protection that allows them to leave at any time.
He called for a balance in protecting both enterprises and employees.
Su Hainan, deputy head of the China Association For Labor Studies, said the recent rapid rise in pay rates is a just remedy for the long-term lack of growth since China started its reform and opening-up policies three decades ago.
But Su agreed it's unsustainable if wages increase faster than productivity.
He added that China has lost the demographic dividend that provided cheap labor, saying that a labor shortage in some parts of the country is part to blame for the growth in wages.
