Disappearance of cheap labor in China

As China’s standard of living rises, so does it’s average wages.  The rising costs of manufacturing means that it is no longer an obvious placebo set up shop if looking for cheap labour.

Over the next two years minimum wages are expected to increase an average of thirteen percent annually. [1] This is added to the dramatic increases in wages that have already taken place since 2001 when China became a member of the World Trade Organization. This prompted US companies to move manufacturing operations into China, taking advantage of low wages (under a dollar an hour) and a large labour pool.

There is a rising expectation for manufacturers to provide pension and benefits for its Chinese labor component.

China is notorious for dirty manufacturing standards. I have friends that can attest to the severity of smog in some of its cities.  As the money flows in, and environmental practices are reported by world media,  the government has began tightening regulations. Though it yet the poster child for the green movement, standards are changing, which drives up costs.

We are also seeing rising land and energy costs there. This is pushing those in search if cheap labor to move operations to places like, Thailand, Cambodia, and Vietnam.  I some cases, companies have decided that it’s more effective to repatriate manufacturing back to the US.

While this is a concern for some, it hasn’t sparked a stampede out of China. The local economy has sharply gained power, which is quite amazing, considering China was synonymous with poverty a few decades ago. People’s lives have generally been changed for the better. Workers are seeing improved working conditions and worker’s rights. Although some companies may one day pull their factories out of China, the effect of increased wages, rights, living and environmental standards has raised the bar for for it’s citizens.

Tahric Finn

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1) Ann, 2012. China no longer land of cheap labor. China Reports, June 15, 2012. p4.

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