The End of Cheap Labor In China

hackingbear writes "In the past decade, real wages for manufacturing workers in China have grown nearly 12% per year. The hourly cost advantage, while still significant [comparing to the West], is shrinking rapidly. The changing economics of Made in China will benefit both the rich and poor world. Countries like Cambodia, Laos, India and Vietnam are picking up some of the cheapest labor manufacturing left by the Chinese. And there is already evidence of at least the beginning of a shift in manufacturing operations returning to the US. Perhaps we will soon stop picking at 'Made in China' but instead complaining 'Made in Vietnam/Cambodia,' while serving the flood of Chinese tourists stocking up on brand-name merchandises on US tours and Chinese students paying high tuitions to our cash-strapped universities."

Re:Central planning doesn't work.

[paulo.casanova]

China is not centrally planned? There is no way you can be serious... check NDRC [wikipedia.org]

The map is not the territory

[ameline]

Have you actually been there? (I just got back.) Shanghai is an interesting place, that's for sure. Wages for university educated and skilled people there are rising quickly. (You can't use unskilled farmers as programmers.) At the present rate of growth, they will match North American wages for equivalent work in about 4 to 5 years. Now I'm perfectly prepared to entertain arguments that the present rate of growth is unsustainable, so lay them on me... (And explain how they won't also depress wages here.)

And We Continue Sliding Towards Marginalization

[damn_registrars]

Chinese wages are increasing 12% per year, while real wages in the US are decreasing every year. Soon it won't matter whether or not China buys us out, because we won't be able to afford their products anyways.

Re:The terrors of globalization

[goodmanj]

You're operating under the critical misconception that a whole billion Chinese have been elevated to high standards. (By the way, there are actually 1.3 billion now).

No, I don't believe that all 1.3 billion Chinese are shopping for Gucci in a chic Shanghai highrise shopping center right now, and I realize that true wealth is only found among the ruling and business class. And yes, I do know the population of China: one of the reasons I talked about the fate of "1 billion Chinese" rather than 1.3 billion is because several hundred million are still stuck working on the same rice fields their grandfathers farmed.

But while only a few have become wealthy, the majority have seen huge relative gains, and very few Chinese could be said to have been totally "left behind". If you look at the data [slashdot.org] and research any statistic that applies to the population as a whole rather than the elite -- % of population earning below $2 a day, food calories consumed per person, electricity use per person, infant mortality, access to clean water and improved sanitation, cell phone use -- all of these show huge gains that extend to (almost) all of society, not just the elite.

The ruling class and the business class are living well, and the other billion are just scraping by.

The definition of "just scraping by" has changed radically. Now it's, "can I afford a cell phone? A computer? Maybe a car someday?" rather than "will my child die of malnutrition this year?"

As for the ability to travel, consider that 230 *million* Chinese traveled from the cities where they work to their home towns this past Chinese new year. That's not just the elite business class: that's mobility for the working person.
http://www.guardian.co.uk/world/interactive/2011/jan/27/china-railways-audio-slideshow [guardian.co.uk]

Re:Central planning doesn't work.

[tmosley]

Nice link. Funny thing is that you think that their staff of 890 somehow plans their whole economy.

Basically all they do is fund the building infrastructure and energy projects, like a combination of the DoT and the DoE, but with far, FAR fewer employees.

You can judge the true extent of the central planning of any given economy directly by looking at the percentage of GDP that the government consumes. China is twenty. Not great, but not bad either. Prior to the opening of the Federal Reserve, the US fluctuated between 2 and 5%. Today, it's greater than 40%. That is as bad as many African nations.

Re:Central planning doesn't work.

[OctaviusIII]

The US is at 10% unemployment with more families living with fewer funds, resulting with many people who do not have minimum food or shelter. It is unclear if China has such a problem.

Well, let's look at the economic stats, according to the CIA World Factbook [cia.gov]:

- Unemployment is at 4.3%. Not bad, and certainly less than what we have.
- GDP per capita (PPP) is $7,600. That is hardly the rich power we think of when we think "China". It's middle-income, with vast disparities in their society. While some live in fabulous apartments in Shanghai or Beijing, others live in third-world poverty in Urumqi or Lanzhou.

I think it's clear that China has a problem with poverty generally. The US has a temporary unemployment problem; China has a structural wealth problem.

Re:Central planning doesn't work.

[bye]

Prior to the opening of the Federal Reserve, the US fluctuated between 2 and 5%. Today, it's greater than 40%. That is as bad as many African nations.

FYI, that's a false statement, most African nations spend much less than 40% of their GDP on providing civilization to their citizens [wikimedia.org]: Burkina Faso (21.6%), Cameroon (18.5%), Côte d'Ivoire (19.7%) - you name it.

The countries you wanted to compare the US with is Germany (43.7%), Finland (49.5%) or Sweden (52.5%).

What does that spending buy their citizens: universal health-care for all citizens, as a birthright. High quality public education that almost all eduction happens in public schools and universities. Well-developed public transportation systems shipping children to school which transportation system I'm sure you'd enjoy as a tourist as well. Pervasive unemployment insurance and various protections for job-takers and their families: no hire-and-fire. Compare German unemployment during the crisis with US unemployment and guess which one spends more of its GDP on common good services for its citizens?

And you want the US to move to the same level of civilization as Burkina Faso or Côte d'Ivoire? Corporate donors will love it but good luck selling that to your fellow citizens ...