Chinese Workers Are Revolting – Part Two

by on
Style:
Category:
Global Trade, Macroeconomics

A more serious consequence than rising worker agitation resulting from the one child demographic is that young Chinese workers are due to be in short supply:

Having risen for the past decade, the number of Chinese aged 15 to 29 will fall sharply after 2011. Rather than having as its main resource a limitless supply of cheap labor, some believe that in fact China, at least at the coastal margins will soon be suffering from a limit in the supply of labor. The authorities seem to agree and have been pouring money and incentives as part of a carrot and stick approach to pushing investment towards the western provinces. China’s much fabled worker mobility is not all that it seems. Many workers believe at around 30 they are too old to travel 1-2,000 kms to look for better paid jobs near coastal cities. Some estimates suggest 70m workers could still be available in western provinces to migrate to eastern economic zones, a phenomenal number but not the 100’s millions that have been touted in the past. In fact what is probably happening is labor market segmentation (not unusual in mature economies with much shorter distances involved) whereby coastal zones experience high levels of employment, wage inflation, economic growth and rising living standards while western provinces experience wage levels at half what they are at the coast creating opportunities for firms looking for the “next China.

Rising wage rates would have an uncomfortable impact on China but in the long run would be very much to the country’s benefit. Uncomfortable in that it would force genuinely low cost jobs westwards but beneficial in that rising wages would drive rising living standards, greater internal consumption and a re-balancing of an artificially skewed global trade balance. Consumer spending in China amounts to only 13% of American GDP, according to a recent Economist article. Greater spending would go toward western made goods as well as domestic. An increase in consumption of American made goods would directly translate into American jobs assuming open trade was allowed to fulfill those needs. Rising living standards in China, driven by rising wages, would also re-direct manufacturing activity for the sake of domestic consumption rather than exports, a trend that many hoped would happen as a result of the drop in world markets after 2008 but which China’s persistent trade surplus shows has barely been dented by the economic crisis.

–Stuart Burns

So may be we should see worker agitation at factories like Honda’s not as a worrying breakdown of order but as part of a longer term re-balancing of china’s trade with the world and an opportunity for improvement in the living standards of the Chinese people.

Comment (1)

  1. jorge vazquez says:

    excellent analysis!

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.