原文标题：Wage Rises in China May Ease Slowdown
BEIJING—Wages are still climbing rapidly in China and many companies are having trouble filling jobs despite the sharp economic slowdown here—evidence of a structural shortage in the labor market that may help China adjust to slower growth without political instability and whet consumer appetites for foreign goods.
Reflecting the tight labor market, wage income for urban households rose 13% year-on-year in the first half, and average monthly income for migrant workers rose 14.9%, according to data from China's National Bureau of Statistics. A labor ministry survey of 91 cities in the first quarter showed demand for workers outstripping supply by a record amount, pointing to low unemployment.
The tight job situation, which contrasts with worrisome levels of unemployment in the U.S. and Europe, helps explain why Beijing isn't rushing to match the massive stimulus plan it put in place in 2009.
北京——中国工资仍然迅速攀升，尽管经济放缓，但许多公司仍然招不到人 —— 这是劳动力市场结构性缺陷的证据，有助于中国调慢经济增速，却不引发政治不稳定和刺激国外消费品需求。
Back then, a crash in global trade forced large-scale layoffs in factories along the coast, and as many as 20 million migrant workers streamed home to inland villages, raising fears of social unrest that spurred the government to spend lavishly on high speed rail, road and other projects to prop up growth.
Thus far, the global slowdown isn't nearly as deep as it was in 2009 when the world economy skidded into recession. Sheng Laiyun, a spokesman for the National Bureau of Statistics, said that around six million new jobs were created in China's cities in the first half of the year, and employment numbers for migrant workers also crept up.
Rising wages also bring risks, though. In China, wages are starting from a very low base, but they are climbing fast. At current rates, China's private-sector manufacturing wages will double from their 2011 levels by 2015, and triple by 2017, eroding competitiveness and denting the exports that have played a key part in China's early growth.
Indeed, Boston Consulting Group calculates that China's wages could rise above Mexico's this year when factoring in differences in productivity between the two nations.
The transition to a higher-wage economy, with a bigger role for service-sector output and domestic consumption, won't be straightforward. Tough policy decisions, including opening key parts of the service sector—like banking and telecoms—to greater competition, have yet to be taken. Some of those decisions require confronting powerful interest groups like state-owned enterprises and local government. The process will play out in years, not months.
The results will have consequences for who wins and loses from China's rapidly changing economy. The same increases in wages that start to price China's products out of global markets should also lift demand for imports of consumer goods. The main beneficiaries of China's rapid growth so far have been commodity exporters like iron ore-rich Australia and manufacturers of advanced machinery like Germany. In the future, producers of high-end consumer goods in the U.S. and Europe could enjoy more of the benefits.
The move to higher wages is being shaped by changes in population and government policy. The size of the workforce has plateaued, demographers say, and will start to shrink in the middle of the decade, competition for workers.
China is committed to sharply raising minimum wages, which puts pressure on employers to raise salaries for higher skilled workers. Beijing also has increased requirements for severance payments, which discourages layoffs unless business drops severely.
In the past, breakneck growth—with increases in gross domestic product averaging around 10% a year for the past 30 years—was necessary to create jobs for the millions of young workers flooding into China's job market each year. Now that flood is drying up, just as China looks to focus more on service-sector growth.
That dynamic helps explain why there have been few reports of layoffs, even though growth in China's GDP has almost halved from a peak of 14.8% in the second quarter of 2007, to 7.6% in the second quarter of 2012. It also explains why China's leaders appear more sanguine about slowing growth. "China's potential growth rate has fallen," said Chen Dongqi, a senior government researcher, adding that "7% to 8% is the new normal."
China's official unemployment rate was 4.1% at the end of the first quarter, though the data cover only urban workers and are widely regarded as unreliable. The U.S. jobless rate was 8.2% in June, and wages rose 1.7% in the first period of 2012 compared with a year ago. In the euro area, unemployment hit a euro-era high of 11.1% in May.
Some of China's largest private employers report rising wages and hiring. Hon Hai Precision Industry Co., 2317.TW +0.46% which
produces Apple's AAPL +0.32% iPad, added 82,000 to its mainland China workforce in 2011, taking the total to 998,599. Base salaries for factory workers at the company's Shenzhen plant were 2,200 yuan ($345) a month as of February this year, up 10% from 2011, said the company.
Yum Brands' YUM -1.05% KFC and Pizza Hut restaurants employ 400,000 workers in China, and are adding around 40,000 a year, the company said. The company reported 17% year-over-year wage inflation in the first quarter of 2012.
An April survey of 4,242 companies in China, conducted by human resources consultancy Manpower Group, MAN -1.89% found that the majority of companies intended to either hold their workforce stable or recruit more workers in the third quarter. Only 3% of the companies surveyed were planning job cuts.
Chinese factories are being forced to invest more in labor-saving technology as wages rise, underlining the impact of the labor shortage. "The days of just adding people are over," said Dwight Nordstrom, president of Pacific Resources International in Beijing, which operates 10 factories in China.
Underpinning resilience in China's labor markets are profound demographic changes. China's one-child policy, introduced in 1980, is starting to eat into labor supply. In 2005, there were 120.7 million Chinese people aged 15-19, according to United Nations estimates. By 2010, that had fallen to 105.3 million, and by 2015 it is expected to dip to 94.9 million.
The number of farm workers ready to head to city factories is no longer growing rapidly. A survey of migrant workers conducted by the National Bureau of Statistics showed the number relatively stable at 252.8 million in 2011, up 4.4% from 242.2 million in 2010, with the number working outside their home province growing even more slowly.
Still, if export growth continues to fade, even high costs for layoffs and difficulties rehiring skilled workers might not prevent layoffs. Over the weekend, Chinese Premier Wen Jiabao warned that China's rebound isn't yet stable and hardship may continue. He added that the government needs to provide financial aid and tax breaks to companies suffering from slowing export growth.
For now, though, the pressure on wages remains. Jennifer Cheung, an editor at China Labour Bulletin, a Hong Kong group that tracks labor disputes in China, says the economic slowdown was unlikely to put downward pressure on wage growth. "We seldom hear strikes where workers protest against wage cuts," she said. "Strikes are more about workers' demand for wage increases."
PAUL HODGES Wrote:
Thanks for the article. I think its a bit inconsistent, though, to argue that people with average earnings of under $4k/year, as shown in your chart, will be in the market for "'high-end' consumer goods". Asian Development Bank data equally suggests 96% of Chinese currently earn less than $20/day, ie $7600/year. So it seems to me the winners in the Chinese market will be those who focus on low-cost, affordable necessities? Or am I missing something?
Eric Mao Wrote:
One omission makes this article nearly worthless: It doesn't mention inflation and thus the wage increases are only nominal, not real.
Tony Carlos Wrote:
It is quickly reaching the point where US labor is again competitive with not just Mexico, but China also. If Chinese manufacturing pay reaches $4000/yr, that would support a US wage of $20,000. Yeah for us.
David Wu Wrote:
Some MBA interns wrote this article, nicely done.
However, I was wondering, while waiting in line for a Starbucks coffee every day for past two weeks in Shanghai (more than 150 Starbucks in Shanghai), that how much these people make to afford a $2.70 a tall coffee (~50% more expensive!) or >$5 a Frappy (9.5 of 10 in front me got Frappy).
BTW a Brook Brothers polo shirt was listed Y998 (>$150) and a Tumi travel umbrella was on sale for Y560 (>$88)
Alison Cheuk Replied:
I noticed that as well. Many thoughts. One thing in particular is, however, RMB is WAYYYYYYY overvalued.
Jose Calabro Wrote:
What ? The Commies' wages are rising and Americans are told to give up healthcare and sacrifice their own wages In the name of "liberty" and "austerity" and "country" ?
STEFAN SCHREIER Wrote:
50 years from now, perhaps sooner, wages and living standards in China will be higher that those in the U.S. or Europe.
Kurt McFarlane Replied:
Not without more oil, water, coal, and phospherus.
Eduardo Alvarez Bilbatua Replied:
You say that as if it was a bad thing
Bob Templor Wrote:
It would, temporarily. Eventually, it will cause general price increase. Then, there will another round minimum wage increase, and another round general price increase.
Pierre Lemieux Wrote:
Like saying that higher ice cream sales may make the outside temperature more bearable -- while, of course, the causality runs the other way: the hot weather leads to increased ice cream sales.
Gary Wraughton Wrote:
Labor shortage in China??? Probably because so many of them are in America on work visas ... H-1A, H-1B, H-2, F-1, F-2, L-1, L2, EB-1, EB-2, EB-3, OPT, CPT, etc. A virtual alphabet soup of visas by which the Federal Government allows companies to bring foreigners here to take American jobs. And I don't mean bean picking jobs. I'm talking about high wage white collar jobs.
中国劳力短缺？？？可能因为他们在美国拿了太多的工作签证了....H-1A, H-1B, H-2, F-1, F-2, L-1, L2, EB-1, EB-2, EB-3, OPT, CPT, 等等。联邦政服用一堆文字拼凑的签证允许公司招外国人来抢走美国人的工作。我不是说收豆子的工作。我说的是高工资的白领工作。
John Eidenshink Replied:
Walk in to any government office and they are filled with foreigners .
Wilhelm Pappeln Replied:
"A virtual alphabet soup of visas by which the Federal Government allows companies to bring foreigners here to take American jobs."
So you're against legal immigration?
Daniel Sirolly Replied:
Most of "them" are not taking jobs that the US has too few of: they areemployed as highly educated engineers and scientists; the United States has too few of these type of scientific workers.
Not dime a dozen MBA middle management jobs that are too filled with empty suits; we produce too many of these jobs and too few of the former.
David Hawkins Wrote:
Rising Chinese wages won't just spur imports; more importantly it will spur consumption of domestically produced goods and services, weaning the economy off of exports. This has been a stated goal of the government for some time, and it's quite surprising that this article doesn't mention it.
David Hawkins Replied:
That may be so, but it is the stated goal of the government to develop a domestic consumer economy. Also, many of those foreign brands are domestically produced.
Terry Carriker Wrote:
Mitt Romney and other GOP members demand wages be cut for US workers, the bottom 95%.
Kevin Mourroe Replied:
Oh, you mean the bottom 95% with the houses, cars, tv's, food, and 95% of global wealth?
Funny when we look at things in relative manners. Or at least face the truth and realize that being 'poor' isn't so bad in the US.
nick shroder Replied:
Yes, and there are some people that think the the bottom 95% have to much and feel that they should have it taken away.
Tony Carlos Replied:
Got a source for that number?
Didn't think so.
America has 39% of the world's wealth, as of 2010. But our rich top 5% control more than 60% of that wealth, so the bottom 95% of Americans have less than 40% of US wealth. Do the math and that works out to our 95% having around 15% of the world's wealth.
What does it say when you need to lie to make a point?
Craig Mundo Wrote:
They have been cutting interest rates, as the economy is slowing, but with these rising wages, rate cuts is adding fuel to the inflation. The Chinese authorities' hands are tied. They are playing with fire. Everyone assumes China will have a soft landing, but wage and other inflation, along with property bubble burst and bad loans at banks and deficits at provincial level will sink China.
Tom Wang Replied:
Wages has been increasing for a long time already.
Despite that, inflation has been manageable for a very long time also.
Recent data (June) shows inflation down to 3.8% while housing prices has firmed up again.
Michael Woerner Wrote:
Chinese wages rising and U.S. employmen is falling. Sounds like the workings of a One World Government doesn't it? Slowly but surely, like the shifting of sand dunes on the desert pieces of the puzzle start to fit together. While some think that would solve our problems it would only delay them. In manufacturing terms there will always be another China, and another, and another.
PETER FOLEY Wrote:
The Chinese government could copy the USA's allowing a massive foreign invasion of third and fourth worlders (10-20million with counting those granted "amnesty" by the 1987 Congress) well over ten percent of the labor market...to keep wages below inflation as the perversion of the social contract here has.
Oh, I forgot, PRC has a surplus of 300,000,000 million peasants waiting to follow their Party leaders into 21st Utopian Commie planned Crony Capitalism, no need for importing a multi-culture Hot Mess guaranteed to lower every Citizen's earning power throughout their lifetimes.
Craig Mundo Replied:
Wages are not being raised by some entity intentionally. They're rising because labor capacity is running tight. In addition, in response to the euro crisis, the Chinese authorities started cutting rates again recently, after raising them for almost a year. Ironically, we had the same situation last year. China started seeing inflationary pressures in early 2011. To bring it under control, Chinese government began raising rates. It did work for a while. They also imposed controls on property purchases etc, which exerted some more pressure on inflation. But towards the end of 2011, due to euro problems, China was afraid of too much economic deceleration and began cutting rates. Now this is bringing back inflation.
Hence China is in a bind. On one hand, if economy slows too much, people will become restless and the Chinese government is more afraid of that than anything else, particularly now with the transition from Hu and Wen to xi and Li. The Bo XiLai affair made things worse. So they need the economy going. But inflation really limits their ability to stimulate the economy and the jobs picture.
My belief is that Chinese government is desperate for. Resolution to the euro crisis, as they may be the bigger casualty out of euro in the near term. We will see what they come up with.
Tom Wang Replied:
China's 1H2012 inflation was 3.3% while GDP growth at about 8%. Is this a desperate situation?
China sets a conservative target for the year at 4% inflation and 7.5% GDP growth.
Wage growth is not a new phenomena. It has been the background scenario for many years.
Cliff Friend Wrote:
China is raising wages to help spur demand and keep up growth. In The USA wages are stagnant or falling for middles class families and business won't hire because of weak demand with weak economic growth. Maybe if people could afford to buy more stuff then demand will come up here?
David Peterson Wrote:
I don't know if the authors understand economics. Rising wages cut both ways. In a nation of so many poor people, their distributional impact is greater than their affect on growth, but the effect on growth is likely to be negative.