What Is The Impact Of The Pay Surge?

2010 marks a marked year in the development of China's labor market. In this year, not only has the "labor shortage" escalated significantly since 2004, but also a series of labor confrontation events broke out. Some enterprises eventually raised their wages substantially, and led to larger enterprises to increase their wages. The local governments also generally raised the guiding minimum wage. These phenomena were exaggerated as a "pay rise" in the media. Others predicted that foreign enterprises would be forced to move out of China, and China's status as a world factory would not be guaranteed.

As far as my observation is concerned, the wages of ordinary Chinese workers have indeed begun to rise.

First of all, it should be emphasized that a certain increase in wages is a reasonable phenomenon of marketization.

The era of unlimited supply of labor in China has ended.

Rural labor force has been very few, and enterprises can only increase their wages if they want to acquire new labor force.

As China's economy is still growing fast, the rise in wages will be an irreversible trend.

Looking at the wage changes over the past 20 years, we should be surprised at the small increase in wages.

Since the 90s of last century, China's labor productivity has increased rapidly, and the wage level has not improved significantly.

This is an important factor in China's competitive edge.

Now, the rise in wages is only narrowing the increase in labour productivity.

In theory, as long as wages rise less than the increase in labour productivity, wages will not seriously affect corporate profits.

The reason why companies react strongly to wage increases is largely because it is a novelty and not much psychological preparation.

You know, in many parts of the world, when the economic fundamentals and business conditions are relatively good, it is common for workers to ask for higher wages.

The recent wage increase in China reflects the normal demand of the market.

Second, the normal wages.

When the economy develops to a certain stage, some industries are no longer suitable for the economic environment of the region, so they need to pform to a more advanced industry.

And the rise in wages is one of the driving forces.

Land and housing prices are another mechanism that forces industrial pformation.

The rise of land price and house price generally represents the economic development level of a region.

In the inner ring of Shanghai, no one would advocate developing the processing trade vigorously.

Moreover, no development of processing trade is unreasonable, because the service economy there can bring greater added value.

In this sense, when Chinese enterprises change their production and pfer due to rising wages, it is clear that China's economic development has entered a higher stage.

In the process, I believe that many enterprises will gradually migrate, but this is a natural selection process of survival of the fittest.

But it is worth noting that the labor force

After the labor force is expensive, enterprises can extend to both ends of the industrial value chain, increase the added value of products, and improve the management and production processes to offset the negative impact of the increase in labor costs.

In many ways, the cost of Chinese enterprises is still relatively low, and there is a clear gap between them in terms of management, R & D and technology.

After the rise in wages, Chinese enterprises still have much room for learning and imitation, and the advantage of backwardness is still not lost.

This also means that China's position as the world's factory still has much room for detour.

Historically, only a country's wage level has risen to a higher level, and the status of the world's factory will be shaken.

So is Britain, and so is Japan.

But one condition is that we must constantly improve the speed of labor production by improving the input of other factors of production.

(Fu Yong, Ph.D. in economics, macroeconomics observer)