“The End of Cheap Chinese Labor”

At the beginning of China’s economic reforms in 1978, the annual wage of a Chinese urban worker was only $1,004 in U.S. dollars

…However, wages are now rising in China. In 2010, the annual wage of a Chinese urban worker reached $5,487 in U.S. dollars

…China’s wages also increased faster than productivity since the late 1990s, suggesting that Chinese labor is becoming more expensive in this sense as well.

China’s labor force may have already reached its peak in 2011; and China’s rural-to-urban migration will also slow down because the rural young are highly rural-to-urban migration will also slow down because the rural young are highly mobile; almost all rural youth in the 16–20 age bracket are already working off the farm.

…Therefore, future increases in migrant labor must come from those who are older or those who have established families, who will require the prospect of larger wage gains than migrants of the past if they are to find migration worthwhile.

Each time I hear shouts of sweatshops, I hear louder shouts from bosses about rising wages. These are not wholly inconsistent stroies but nor are they wholly consistent. And one story has hard numbers.

If there is a more important economic change for other developing countries, I don’t know it. Prepare thyselves for the migration of much manufacturing to other shores?

An article in the latest JEP.

Also interesting is “How did China Take Off?” by MIT Sloan’s Yasheng Huang.

27 Responses

  1. “And one story has hard numbers.” Ah yes, and only “hard numbers” have validity. Especially in oppressive countries that manufacture numbers as well as goods…

  2. “Each time I hear shouts of sweatshops, I hear louder shouts from bosses about rising wages. These are not wholly inconsistent stroies but nor are they wholly consistent. And one story has hard numbers.”

    So… what does this mean exactly? Are you saying there are no “hard numbers” behind critiques of low-wage manufacturing? The meaning of these Tyler Cowen-esque delphic statements are mysterious to me.

  3. Much manufacturing will more likely use more robots. The cost curves are moving in opposite directions, and the world has a surplus of idle capital. It’s a good thing that humanity is freeing itself from repetitive debilitating tasks, but emerging countries will have to skip to the next thing for development.

  4. As I understand it, production may not move away from China asrapidly as it moved there in the first place, because now the story is as much about all the transport infrastructure that is now in place together with the skilled workforce necessary for industrial clusters. Are wage differentials between China and would be competitors as great as they were between the West and China 20 years ago? (I doubt it, but haven’t seen any data.) It will be interesting to see what transpires.