皇冠体育app

Opinion

Counting the cost of rising wages in Chinese industry

(皇冠体育app Daily)
Updated: 2010-06-30 10:18

Peng Wensheng, research head of 皇冠体育app economy at Barclays Capital

The recent developments in labor issues involve workers in the manufacturing sector in some coastal areas, most of them migrant workers from rural, inland areas.

An immediate explanation is to relate it to the so-called Lewis Turning Point, a highly stylized model of economic development in a labor surplus economy. After reaching the turning point, surplus labor disappears, the job market tightens and real wages rise rapidly, forcing structural changes in the economy.

There are possible reasons for seeing the Lewis Turning Point effect earlier than would be suggested by the urbanization rate in 皇冠体育app.

皇冠体育app is a huge country, and differences in regional development and incomes are wide. This implies a differentiated labor market with imperfect mobility. The disappearance of the labor surplus is likely to start in coastal areas where the modern urban sector is most developed. In other words, the turning point may take place at different times in different regions.

Related readings:  Young migrant workers have 'high expectations'  Higher taxes for rich, better wages for poor  Demand for skilled labor set to fuel higher wages: Poll  Minimum wages rise in 11 provinces

Another important factor is changing demographics. 皇冠体育app's working age population is approaching its peak. One difference between 皇冠体育app and Japan is that Japan's urbanization largely ended in the 1970s, but its working-age population peaked only in the early 1990s. In 皇冠体育app, the working-age population will peak much earlier than the completion of urbanization. Therefore, surplus labor is likely to disappear earlier in 皇冠体育app's urbanization process.

Moreover, many of the new generation of workers have grown up in one-child families (the one-child policy started in the early 1980s, initially in urban areas, but the policy was also much strengthened in rural areas in the 1990s). They are much better educated and have greater aspirations than their parents.

As a result of the disappearing labor surplus, 皇冠体育app's economic growth may decelerate, as the rate of labor force growth falls and the rate of investment slows.