China's minimum-wage increase will raise prices around the world

http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/111109/china-economy-manufacturing-guangdong

by ck2 • 15 years ago

53 58 15 years ago

hotdox• 15 years ago

Is there some numbers about wage part in product price?

cageface• 15 years ago

This is the way globalization is supposed to work, isn't it? Over time the difference in wages between one country and another for the same work should diminish.

AndrewDucker2• 15 years ago

Yup. I'd expect exactly what's happening at the moment - richer countries to stagnate, poorer countries to see rocketing wage inflation, and eventual stability.

It'll take a couple of generations though, what with differences in education, training, etc. to work through.

ck22• 15 years ago

Yup, I don't actually have a problem with this - if only it meant domestic production would be more viable but that is unlikely. However won't a wage increase for thay many workers just mean their local inflation will also rise?

I still want to know we can buy 50 cent items from China off ebay and have them mailed individually for free. How on earth does their postal service (and our local country's) mail something that cheaply? Cannot quite grasp the logic.

jrockway• 15 years ago

Domestic production is already viable for many, many consumer products. The margins are so high that the minimum wage difference doesn't matter.

It's stuff like 99-cents-for-ten-gallons shampoo that is most profitably produced in China, and that will probably remain the case.

rdtsc• 15 years ago

> if only it meant domestic production would be more viable but that is unlikely.

What would probably happen first is other countries will be targeted for low wage labor, I am thinking Vietnam.

moonchrome3• 15 years ago

Not exactly, minimum wage laws aren't actually market forces and I think two things are likely a) further inflation in essential goods, seeing how China already has inflation problems this is probably a response to that but will only add fuel to the fire b) fewer jobs, especially considering the part of their economy based on construction - and that bubble is bursting ATM. China has to compete with India, the rest of Asia, and automation on top of that.

This doesn't look like it's going to end well.

_delirium2• 15 years ago

They may or may not come out of it on top, but China's government does have some pretty solid technocrats running the numbers when they do these sorts of things. One guess is that they're worried that without the lower-end workers getting somewhat more money, there will be unrest that the government will have to do something about, for example by subsidizing housing if a typical worker in the area can't afford housing on the minimum-wage salary. If that were the case, this would be basically a way of internalizing the externality--- baking the social-unrest-reduction fee into the wages, rather than using taxes (on the same companies) to spend out of a separate pot for welfare.

maximusprime• 15 years ago

And we all end up poor! Great.

known2• 15 years ago

Unlike in America, Economic mobility and Social mobility are mutually exclusive in Chindia.

dman3• 15 years ago

Can you elaborate on what you mean?

ck22• 15 years ago

Looks like Cambodia is going to become the new China.

I also see more UPS batteries that are made in Vietnam instead of China.

yaix2• 15 years ago

Bangladesh and Pakistan are already huge in clothing. Vietnam is also atracting many producers of cheap/easy to make products. China is moving to mote complex products. That's just how it is supposed to work.

andrewfelix• 15 years ago

If this is going to reduce consumption globally, then this is good news IMO. One of the best things we can do for the planet is consume and import less crap.

On a kind of unrelated note, I'm hoping that the digital economy starts to really placate our need to buy useless physical stuff.

wladimir• 15 years ago

...and that the digital economy and the advances in communication technology will make it less important where you live, and where you were born.

It is probably naive, but I still have some hope for technology to be an empowering, equalizing force that will make the world a "flatter" place.

AndrewDucker2• 15 years ago

It is flatter. Poorer countries are getting richer, richer countries are stagnating, we're moving closer to equality.

The only question is whether richer countries will actually collapse down to a lower level, or if they will just stagnate until the poorer countries catch up.

(Personally, I hope the latter.)

solokumba• 15 years ago

Good. Maybe we can start making things in our country now.

electromagnetic3• 15 years ago

I honestly think most companies keep production out of North America simply because factory workers have a tendency to go Union, and factory workers will always get the backing of other unionised factory workers.

This is like the Walmart Union situation in which the workers don't realise that Walmart makes money because these people are willing to work at minimum wage so walmart can undercut local competition. If walmart starts paying above-market-rate for wages, then it can no longer undercut local competition, meaning a lot of stores will close because they don't have a high enough profit margin, meaning mass lay offs.

IMO unionising isn't worth it if I have a 1 in 5 chance of getting laid off, especially if it means I won't have luck at finding another job.

Rastafarian• 15 years ago

I honestly think you're simply an awful person.

No, people in 21st century US should not live in misery and fear of losing their job.

Walmart obviously has many other advantages over smaller competition other than the wages. It won't close because of say 20% wages increase.

If a Walmart store closes, local people obviously will continue to buy food. I.e. there will be many new stores open, ex-Walmart employees will be in a good position to take advantage of that, as they know the local customers.

IMO unionizing is the only sensible strategy for any employee, that is easy to replace. Especially for employees of not so ethical corporations like Walmart and Zynda.

yummyfajitas3• 15 years ago

We already do.

http://research.stlouisfed.org/fred2/series/INDPRO

yaix2• 15 years ago

China's minimum wage reduced prices around the world. For some simple products like clothes, other places with lower wages like Pakistan, Bangladesh and Vietnam are already taking over a big part of production. Great. Because eventually their wages will be too high as well.

shareme• 15 years ago

Unfortunately no in the long term as factories prepared for this by moving towards automation. The small time jobbers yes obviously..

jasonkester• 15 years ago

“I think there’s quite a good argument now that the global race to the bottom has been concluded,” said Geoffrey Crothall of the China Labour Bulletin, a Hong Kong-based labor-rights group. “There’s nowhere else to go.”

I don't know about this. My globe shows an entire continent yet untouched, complete with good ports and hundreds of millions of potential cheap laborers who I imagine would be more than happy to find a Walmart factory in their neighborhood.

thefool• 15 years ago

If you are referring to Africa, there's a good reason multinational corporations aren't opening up shop.

Namely, the multinational corporations of the 1880's and on made such a mess of things that many of the countries now have very little infrastructure and spigot economies where multiple parties jockey for control of the natural resource(s) and hence power in the country.

Barring some sort of radical change, this situation isn't changing any time soon for most places.

The irony is (excepting south Africa and Egypt which have their own histories), the only stable countries where companies might be able to set up shop are the ones with no natural resources, because there's not much to fight over.

jfruh• 15 years ago

True enough at the moment but you'd be surprised how quickly (using "quickly" on a historical scale, we're still talking years or decades) that can change when economic forces start pushing.

If you had told most Americans just 30 years ago that China would be a land of millionaires and gleaming cities and high-skill factories, they'd be flabbergasted, not least because the country was run by an incompetent Communist dictatorship that had starved millions of its own people for no good reason.

skylan_q2• 15 years ago

This doesn't cause inflation. It just shifts money from everywhere else to the poorer people who remain employed on the new minimum wage.

Inflation is caused by increasing the monetary base and having that new money circulate through the economy. Both the US Fed and the Chinese central bank have been doing this.

muraiki• 15 years ago

When money printing can be translated into wages (such as raising the minimum wage), then this sets the stage for consumer price inflation. When the CPI goes up, people demand higher wages, etc.

This is why in the US we probably* don't need to fear hyperinflation: we're not seeing a translation of Fed printing to wages.

*When the Weimar Republic hyperinflated, it was made possible by the fact that large numbers of people were employed by the state, whose wages increased with inflation. I've heard some statistics that place a substantial portion of the US population on government inflation-index income (be it something like social security or something more indirect like Medicare). As to whether it's to a great enough extent to create a Weimar type situation, I don't know.

tomlin• 15 years ago

Capitalism only works if someone is the toilet. China refuses to be the toilet. Other countries with large populations are also becoming industrialised, as such, will refuse to be used as our toilet.

Sarcastically speaking, this couldn't come at a better time.

known2• 15 years ago

Capitalism in NOT zero-sum. Globalization is zero-sum.

yxhuvud4• 15 years ago

No, it is not - as proved by Krugman when he was an economist and not a (poor) politician.

gclaramunt• 15 years ago

Wasn't David Ricardo with his "Comparative Advantages" theory ?

oceanician• 15 years ago

I wonder what % of employees in China are actually earning minimum wages?

nekojima• 15 years ago

Around 80% earn at or below the minimum wage currently.

Most state figures, which indicate a higher rate above the minimum wage, are either made up and/or only include urban working residents, usually those in state owned/controlled enterprises or large "privately" owned enterprises.

cq• 15 years ago

Minimum wage laws are literally the most moral laws that exist in this world.

pavel_lishin• 15 years ago

Why?

esrauch• 15 years ago

Because slavery is the most immoral thing in the world. Dead people don't care that they are dead, slaves care that they are slaves.

DuncanIdaho• 15 years ago

Coupled with social security at near minimum wage levels they combine into literally the most amoral situation that exists in this world.

bfe• 15 years ago

This isn't really news. Minimum wage in China is set per province, and different coastal provinces at different times have been posting significant minimum wage hikes, even competing with each other's wage hikes, for quite a while now.

But more importantly, the government policy actions haven't been the most important factor at work; many employers have been raising wages ahead of and above the minimum wage hikes, and have been actively sending out recruiters for the first time. Many of them have started having a hard time finding enough workers for the first time, after spending the past couple decades seeing long lines form for any job posting. The Chinese labor market has been tilting toward workers' favor on its own, with workers having a lot more options. This will keep pressuring wages up in the coastal provinces, keep redistributing production and domestic spending power to the inland provinces and other countries in southeast and south Asia, and keep spreading domestic demand throughout, all of which is overall good for all of them, and good for the rest of us.

blahedo• 15 years ago

> “I think there’s quite a good argument now that the global race to the bottom has been concluded,” said Geoffrey Crothall of the China Labour Bulletin, a Hong Kong-based labor-rights group. “There’s nowhere else to go.”

Africa?

China's minimum-wage increase will raise prices around the world

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