Wednesday, July 14, 2010

Labor Shortage China Style: Demographic Changes

From Yglesias:
Andrew Jacobs in the NYT offers another angle on the story of rising wages in China:
The shortage has emboldened workers and inspired a spate of strikes .... Although the walkouts were quelled with higher salaries, factory owners and labor experts say that the strikes have driven home a looming reality that had been predicted by demographers: the supply of workers 16 to 24 years old has peaked and will drop by a third in the next 12 years, thanks to stringent family-planning policies that have sharply reduced China’s population growth.
Transitions are difficult, but I think you have to judge rising wages in China to be pretty unambiguously a positive development. The labor share of income in China had become terrifyingly low as the country industrialized, so there’s a need for a return to equilibrium. And higher wages will let Chinese factory workers improve their living standards, along with giving countries from Vietnam to India and beyond to get a chance to step onto some of the lower rungs of the manufacturing ladder.
Imagine this, though: a labor shortage in a country of over 1 billion people.

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