Is Chinese Labor Still Cheap?

The Economist hosts a forum asking “Is the era of cheap Chinese labor over?” Participants include Tyler Cowen, Lant Pritchett and Ricardo Haussmann. Cowen’s take: “The real question is what you get for your money, when you hire a worker. If Chinese wages are rising, it is because Chinese workers have shown that they are more productive. All the capital investment in China is yielding dividends in terms of greater output per worker and that’s good for virtually everyone.” [%comments]

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  1. speckledegee says:

    >If Chinese wages are rising, it is because Chinese workers have shown that they are more productive.

    Than who? The Greeks? Of their own devices? As if Chinese workers were only by this time wrung for every last ounce of human capacity.

    This could be one of em silly one-liners from the PRC’s ministry of facts n figures.

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  2. Val says:

    Why would compare the chinese to the greeks, why not to chinese a year ago, would make more sense.

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  3. assumo says:

    Are chinese products still cheaply made?

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  4. Drill-Baby-Drill Drill Team says:

    First Japan, then Korea then China. Low priced goods then lead to production of more higher priced and sophisticated products. Costs go up, but productivity gains offset this, and their import markets go upscale, threatening traditional Western domination.

    Yes Chinese labor will go up. But also the products become more sophisticated and clever. And it will threaten traditional Western high valued goods such as Automobiles, Home Appliances, Furniture, Flat Screen TVs. and electronics.

    They do not have to be the cheapest labor…just cheaper and more efficient than the competition. We must work harder.

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  5. wau says:

    Yes. Chinese labor is still considered cheap versus the U.S. but before you take your manufacturing abroad, you should consider all the financial impacts. Labor is often only a small percent of the manufacturing cost. Be careful that your other costs don’t offset the labor savings.

    http://www.import-from-china-business.com/import-export.html

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  6. J_Reader says:

    I thought it was because the suicides were bad publicity for the firms.

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  7. Phil H says:

    “Cheap” is the wrong word. It’s more accurate and useful to ask “cheaper than any alternative”. Manufacturing moves to where labour costs are lowest, and it will simply get to a point where manufacturers (who are still largely western-owned multinationals, and not bound to China by social or political ties) will take their manufacturing contracts elswehere. China won’t collapse, but it will stop growing as fast, and will end up a middle-tier nation with a developed economy.

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  8. Eric M. Jones says:

    @7–Phil H: “Manufacturing moves to where labour costs are lowest.”

    No, it doesn’t. Switzerland figured that out two centuries ago. And I guarantee that the manufacturing cost in Zimbabwe, Sudan and India are far lower than in China.

    Although there is some truth to this chestnut, what normally happens is that industry owners hope to see a fast increase in profits by exporting the business. Then they take a big bonus and leave the wreckage for the next guy.

    And US Taxpayers (those who still exist) pay the social costs. Oh, and those who get the big bonuses get giant tax breaks, while those who chain-sawed US industrial power get another obscenely high-paid job.

    It’s hard to be cynical enough to keep up with reality.

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