The Tide Of Wage Increases Forces The Transformation And Upgrading Of Industries

China's manufacturing industry, which once relied on cheap labor to a considerable extent to win, is facing the challenge of rising labor costs.

Recently, the "wage increase tide" led by Foxconn and Guangzhou Honda began to spread. Since this year, Shanghai, Shenzhen, Beijing and other places have announced the increase of the minimum wage standard, which will inevitably increase labor costs in various places.

Recently, Su Hainan, director of the Institute of Labor Wages of the Ministry of Human Resources and Social Security, made it clear in an interview with the reporter of People's Daily Overseas Edition that China has basically met the conditions to realize the "national income doubling plan" of "an average annual wage increase of more than 15%, which can be doubled in about five years", Therefore, we should consider or adopt similar practices as appropriate in the 12th Five Year Plan or the government's work plan.

All kinds of phenomena show that China is accelerating the pace of reforming the income distribution system and has entered the substantive stage.

Wage rise is inevitable, and the rise of labor cost is the general trend. In the future, the proportion of wage cost in the total cost of enterprises will further increase. Although enterprises will face pain in the short term, in the medium and long term, wage increases will be beneficial to the development of China's manufacturing industry. Rising labor costs will force enterprises to upgrade their industries and improve the competitiveness of the entire industry through industry reshuffle.

　 Excerpt from the original text: The textile and clothing industry is most affected by salary increases

Based on the data provided by the 2009 annual reports of listed companies, the author makes a statistical analysis of the sensitivity of manufacturing industry to the rise of human costs. The results show that among the sub industries of manufacturing industry, the textile, clothing and fur industry is the most labor intensive industry, with the lowest average wage, the highest proportion of wage costs in total operating costs, and the strongest sensitivity to changes in human costs. When the rise tide comes, the industry will be the most affected.

The author made statistics on the wage level of 968 manufacturing companies, and extracted the indicators of the number of employees, total wages, total operating income, total operating costs and other indicators of listed companies in 2009.

The statistical results show that among the 10 manufacturing sub industries of electronics, textile and clothing, machinery and equipment, metal and non-metal, wood furniture, food and beverage, medicine and biology, paper and printing, textile and clothing is the most labor intensive industry.

The statistical results of industry average wages show that the textile and clothing industry is at the lowest level of all manufacturing industries. In 2009, the average annual salary of employees in this industry was only 31000 yuan, far lower than the average annual salary of 56500 yuan in the manufacturing industry. In the manufacturing industry, the average annual salary of employees is higher in machinery, equipment and meters and metal and non-metal industries, reaching more than 65000 yuan.

In terms of the proportion of employee wages in total operating costs, it is also the highest in textile and clothing industries, reaching 10.24%, and other manufacturing sub industries are all below 9%. If employees' wages rise further, the pressure felt by the textile and clothing industry will certainly be stronger than that of companies in other industries.

Under the pressure of rising labor costs, China's manufacturing industry will gradually lose its low-cost labor cost advantage, and short-term enterprises will face pain, but it may not be a bad thing in the long run. Rising labor costs will force China's manufacturing industry to accelerate the pace of transformation and upgrading.

In this regard, CICC Wang Hanfeng has also discussed for a long time, saying that rising labor costs will promote industrial transformation and upgrading of industrial structure. Specifically, the rise in labor costs will bring three major medium - and long-term industrial trends to China: the proportion of manufacturing industry will shrink, and the scale of traditional manufacturing industry will grow steadily, but all industries will enter the stage of restructuring and integration, and industry concentration will increase; The proportion of high value-added and technology intensive manufacturing industry has expanded and the product grade has been improved; The improvement of labor remuneration supports consumption, the expansion of service scale and structural upgrading. (excerpted from Liu Qiaoling, author of the Securities Times on June 11) {page_break}

comment

Textile and garment industry is a highly market-oriented and privatization industry. Since the reform and opening up, in the development process of the textile and clothing industry, every challenge can be transformed into a driving force for industry transformation and upgrading. I hope this time we can also gain from the impact and challenges brought by the rising labor costs.

In the short term, labor-intensive textile and clothing industries will face a painful process. The competition in these industries is already extremely fierce. There are too many small and medium-sized enterprises, and the industry competition is disorderly. Price war is often used in the competition. After the gradual rise of wages, the living space of small enterprises with poor competitiveness is compressed and may eventually be closed. In the medium and long term, wage increases are beneficial to the development of the textile industry. Rising labor costs will force enterprises to upgrade their industries and improve the competitiveness of the entire industry through industry reshuffle.

At present, some good signs have emerged, and some enterprises have made solid progress in industrial transformation and upgrading. For example, Lutai and Huafu Color Textile have stronger risk resistance than similar companies by virtue of their higher R&D level, bargaining power, high-end positioning, differentiation and other strategies.