|Chinaís Wages on the Rise, and Workers Grow Scarce|
|Key Words||China, wages, prices, labor supply, demand, skilled labor, unskilled labor.|
|News Story||China is experiencing the strange problem of not having enough workers to operate some of its factories. As a result, factory owners are being forced to raise wages to bring in additional help, or to simply shut down production lines. Itís a phenomenon thatís not likely to end anytime soon.
The worker shortage is not affecting all levels in Chinaís economy. The supply of skilled laborers is still strong, and the overall unemployment rate is above zero. Factory workers are hard to come by, because they are aiming for the jobs that require some skills, and therefore command higher wages. And those at the mid-level in the labor force are looking for jobs that pay even higher wages. The result is that pockets of labor shortages are appearing throughout China. Such shortages began to be seen in 2003 in urban areas, and itís predicted to hit even rural areas by 2009.
The end result is an increase in wages to bring people back into the factories. Wages at one bicycle factory in China have risen from the equivalent of $197 a month to $263 a month, and thatís just since this past February. Granted, some of this is the result of increased productivity; workers with higher productivity will be rewarded with higher salaries. As a result of increased productivity, factory owners can offer higher wages without passing on those cost increases to consumers because of the increased output.
However, the cost of goods imported from China has increased 1.2% since February, according to the US Labor Department. In July, the department reported a 0.4% increase over Juneís prices, the biggest jump yet. Itís becoming clear that such wage increases will go beyond compensation for higher productivity, and will begin to hurt consumers.
And thereís a secondary global cost, also: as Chinese workers receive higher wages, increasing their income and standard of living, they will begin demanding more and more goods that to this point they had been unable to afford. Think of the global impact of an increase in Chinese demand for cars, air conditioners, gasoline, etc. There is a significant risk for higher global inflation as Chinaís standard of living increases.
|Source||Bradsher, Keith. ďWages Up in China as Young Workers Grow Scarce,Ē The New York Times, August 29, 2007.|
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