Those folks in Vietnam and China who make our stuff – they
are demanding more pay, a sign of rising prosperity and a global manufacturing
food chain in the works. According to Vietnam’s Department of Labor,
joblessness remains high but business still cannot attract enough workers. It
recommended salary increases and “better welfare mechanisms,” a code for phrase
for job benefits taken for granted in the West. Workers are realizing that they
are better off going it alone, selling on the street, whatever, than being an
underpaid nothing on an assembly line.
The same is true for China, but with much higher stakes. In
Guangzhou, just a year after laying off millions of factory workers, unskilled
factory workers in China’s industrial heartland are being offered signing
bonuses. Factory wages have risen as much as 20 percent. Some manufacturers,
already weeks behind schedule because they can’t find enough workers, are
closing down production lines and considering raising prices. Along with an
appreciating Yuan (inevitable but for when), such increases will drive up the
prices American consumers pay for all sorts of Chinese-made goods, which is
just about everything you’ll find in Walmart.
But rising wages could lead to greater inflation in China.
In the past, inflation has sown social unrest as the cost of living becomes
more expensive. This makes Beijing nervous. The Obama administration has been
pushing China to let the renminbi rise against the dollar, which would erode
some of China’s advantage in exporting. (Rising wages in China have the same
effect — plus they give Chinese families more spending power to grow internally
and buy more American made goods.) It’s a complicated dance. Bubbles and
asymmetries aside, economics ultimately settles on equilibriums. Labor shortages
and its affect on wages is just another illustration.
The immediate cause of the shortage is that millions of
migrant workers who traveled home are not returning to the east coast. Government
projects like rail and highway construction have absorbed millions of workers,
particularly after Beijing allocated nearly $600 billion to economic stimulus
spending in 2009 and 2010. Consumer spending is also rising; auto sales more
than doubled last month from a year before, and this has created jobs in retailing,
restaurants, hotels and other inland businesses.
Temp agencies in Guangzhou have raised their rate for
factory workers in early 2010 to US$1.17 an hour, from 95 cents an hour, just
to put things in perspective. (The rate was 80 cents an hour two years ago,
before the global crisis depressed wages.). But many factories already pay
above minimum wage. They are wary because it is not certain they can pass the
increased costs on to cash-strapped importers in the United States and Europe.
Two powerful trends are also working to reduce the supply of
young labor headed to the “Walmart factories”. For one, the central government
has rapidly expanded postsecondary education. (Universities enrolled 6.4
million new students in 2009, compared to 5.7 million in 2007 and just 2.2
million in 2000.) At the same time, China’s birth rate has been sliding
steadily ever since the introduction of the “one child” policy in 1977. Personnel
managers are even abandoning the unwritten tradition of not hiring those over
35 — imagine that policy in the West! – despite concerns about whether they can
keep up with the grueling rapid pace of assembly line work.
China is rising on the economic ladder, and this is a good
thing, provided the planet can take the hit of more humans becoming conspicuous
consumers. Maybe one day China will outsource to Africa.
But some things don’t change. Quoted in a Chinese paper said
one young man: “I expect my wages to rise a lot now. For sure, I want to buy a
car. Car first, then maybe marriage later.”
