After the Chinese Communist Party (CCP) extended its ruling to most parts of China and set up a national government in Beijing in 1949, it encountered a lot of new tasks.
The strategy that led CCP to state power is termed as "using the rural areas to encircle the cities" (农村包围城市).
In the central level, CCP took a series of reforms in order to gradually build a national-wide unified wage system.
Although details such as the form of wage and the differences between levels varied through this periods, the main features of this system remained constant.
Beyond the common ideology of PRC and USSR that brought similarities in the wage system,[6] there were more direct influences from the Soviet Union on this issue.
Such influence even existed in the Yan'an period (footnote), when Stalin did not trust, or at least was unsure of CCP's ability to win the Chinese Civil War.
[2] As the outcome of the civil war became clearer, the Soviet Union's direct involvement began to play a more important role.
[8] Later, after the emancipation of the whole Northeast for the Nationalist Party in 1948, the reform was carried out under the direction of Soviet's consultants,[9] and employees' were classified into 9 ranks and 39 levels.
The wage system in the socialist regime was not only a method of redistribution, but also was designed as an organic part of the state developmental machine.
Economically, the principle of "distribution according to labor" aspired to encourage people to work harder in order to industrialize an undeveloped country.
Concerning the economic issue, in this high level of institutional design, the 1956 wage hierarchy system aimed at achieving two seemly contradicting goals: on the one hand, it attempted to save the state's expenditures in paying employees' salaries; on the other hand, it sought to encourage workers to work harder in building the socialism.
In order to achieve these goals, it had to expand the gap between grades and levels, distinguish different economic sectors and also use the piecework wage as a material initiative.
[16] Zhou En Lai stated that the first goal of this low wage system was to ensure employees' basic needs for living.
The old payment system under the KMT period was criticized not because that it treated workers unequally, but because that it had little difference between two adjacent levels, and also represented the wrong hierarchy of industrial sectors.
In the logic of the policy design, CCP believed that the tangible difference between levels and ranks would encourage employees to work for promotion.
After the wage rank system was carried out, workers were willing to buy technical books they were not interested in before and also to participate in job training.
In workshop floor, this political criterion was embedded in kind of personal relationship between leaders and their followers, and the latter affected the levels of wage and other benefits one got to a great extent.
Before the socialist transformation, the workers tend to move from public enterprise to private one, from rural place to big city.
[39] Mao might have little idea about the economic policy in the beginning, thus the Soviet experience played a much more important role in the early PRC.
For Mao, the wage rank system was a retrogression in two aspects: it emphasized too much on the material incentives and ignored the political work; it created a new form of inequality among workers and cadres.
"[47] This argument about material incentives was rejected by Mao, manifesting the divergence between the Soviet model and the Chinese Socialist Road.
Like other state-led movements, the quick expansion of piecework wage caused a lot of practical problems in workshop floor.
Despite the ideological debates on the high level politics, some scholars argue that the workshop practices were more influential in the failure of piecework wage system.
In the early days of expanding piecework wage, many factories faced practical difficulties like lack of raw material supplies or cadres who were capable of mastering the technical issues in counting the work.
Walder noted that the group of people who were affected most by wage austerity were those who enter the labor force after 1958,[53] i.e., after the Great Leap Forward.
In the first year of the Great Leap Forward, the state-owned factories recruited a large number of new employees,[55] probably in order to finish the work norm.
According to the data collected by Andrew Walder and others, because of the increasing of the good price, till 1982, the real wage after 1956 never reached its highest point in 1956.
[65][66] This difference between formal workers and other employees might have contributed to keeping a relative high level of work performance in the state-owned factories.
2 years before Mao Ze Dong died, he lamented when he met the Denmark Prime Minister Poul Hartling : "In a word, China belongs to Socialist Countries.
Now it still implements hierarchy wage system based on 8 ranks, distribution according to labour, and exchange through money, all these are not different from the old society.