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 China and the Global Labor Arbitrage ZT |
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TooSimple
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加入时间: 2006/03/19
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作者：TooSimple 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
China has come a long way in the 27 years since Deng Xiaoping launched the world’s most populous nation on a path of unprecedented reform. There have been doubters at virtually every point along the way. Yet time and again, China has stayed the course. The latest worry is that the land of surplus labor is rapidly running out of workers — leading to excessive wage inflation and a loss of competitiveness, with profound implications for China and the rest of the world. Such concerns, like those of the past, are vastly overblown, in my view.
A front-page story on mounting Chinese labor shortages in this week’s New York Times sparked a flurry of incoming calls to our various China experts around the world (see “Labor Shortage in China May Lead to Trade Shift,” 3 April 2006). The anecdotes that form the basis of this report are probably all quite accurate. But the basic conclusion that low-cost Chinese labor is a thing of the past does not stand up well to careful scrutiny. Yes, Chinese wages do appear to be rising at a rapid clip right now. But the increase is coming off such a low level that the cost relatives are still skewed dramatically in favor of China. Moreover, this upsurge of Chinese wage inflation appears to have been accompanied by exceptionally vigorous gains in worker productivity — suggesting that unit labor cost pressures remain under good control. That means China’s competitive advantage remains very much intact.
A recent study published by the US Bureau of Labor Statistics puts the Chinese wage story in context (see Judith Banister, “Manufacturing earnings and compensation in China,” from the August 2005 issue of the Monthly Labor Review). The analysis is based on comprehensive wage statistics that cover the entire Chinese economy; the only drawback is that this data set stops in 2002. Banister does, indeed, find compelling evidence of a brisk acceleration of Chinese wage inflation — a 12% annualized clip over the 1999 to 2002 interval versus average gains of just 2.6% over the preceding five years. But this hardly represents the beginning of the end for China. It turns out accelerating Chinese wage inflation has done virtually nothing to close the wage gap with the developed world. Even after four years of double-digit increases, average hourly compensation for the overall Chinese manufacturing sector amounted to just $0.57 in 2002 — literally, 3% of the US hourly pay rate of $21.40 during that same year. Contrasts with other nations were equally dramatic. Hourly compensation for Chinese manufacturing workers in 2002 amounted to 25% of the pay rates of Mexico and Brazil, 10% of the rate of Asia’s newly industrialized economies (i.e., Taiwan, Korea, Hong Kong, and Singapore), and just 3% of the norms of Japan and Europe. Sure, there are differences when the Chinese wage aggregate is broken down into pay by urban enterprises ($0.95 per hour in 2002) and by the more rural township and village enterprises ($0.41). But that granularity changes nothing. Despite several years of sharply accelerating wage inflation, China still enjoys an extraordinary wage differential when compared with the rest of the world.
It is not all that difficult to extend Banister’s conclusions through 2005. According to the China Statistical Yearbook, average annual wage payments in China rose 13% in 2003 and by another 14% in 2004; anecdotal reports, including those in the above-cited New York Times article, suggest that increases in Chinese wage rates continued at close to that clip though 2005. Given the likely expansion of work schedules during this period, it is not unreasonable to conclude that hourly compensation rose by slightly less than the gains in overall wage payments over the past three years. That would suggest that the inflation rate for hourly compensation in China’s manufacturing sector over the past three years might have held quite close to the 12% pace recorded over the 1999 to 2002 time frame. If that was the case, then it turns out the level of Chinese hourly compensation remained at 3% of its US counterpart in 2005 — doing literally nothing to close the enormous gap in pay rates between the two nations. Nor does a worst-case sensitivity analysis alter the outcome in any material way. Under the alternative assumption that Chinese wage inflation doubled over the past three years — increasing by 25% per annum over the 2003-05 interval versus 12% over the 1999 to 2002 period — the level of Chinese wages would only have moved up to 4% of the US norm. The math of small numbers explains the persistence of this outsize differential: Rapid wage inflation off a very low base does little to close the gap with higher-wage economies on a moderate inflation trajectory.
But that’s only half the story. Wages increases should never be assessed in isolation. When making judgments about any nation’s cost pressures and competitiveness, it is essential to compare wage inflation with productivity gains. It is not good if wage pressures mount while productivity remains stagnant. On the other hand, it is perfectly logical — and in fact desirable — for wages to rise in an economy that is experiencing rapid productivity growth. China fits the latter outcome to a tee. Productivity growth in China’s industrial sector — manufacturing, mining, and construction — surged at an average annual rate of nearly 20% over the 2000 to 2004 interval. That’s well in excess of the cost pressures implied by 12% gains in hourly compensation. That means Chinese unit labor costs remain under excellent control — even in the context of rapid and accelerating wage inflation. That, in turn, would limit the pressures building on either the inflation or the profit margin fronts — doing little to jeopardize China’s competitiveness. Upward adjustments of the Chinese currency could certainly alter the international wage comparisons over time. So far, however, the roughly 3.5% move in the RMB has done little to alter this calculus. Needless to say, a large revaluation — something the Chinese continue to resist — would have a more dramatic impact on closing the wage differentials.
Nor do I buy the equally preposterous notion that China is running short of workers, thereby risking a significant loss of market share to some of its equally low-cost Asian neighbors. Over recent years, the industry share of total employment has actually been stagnant to down in India, Indonesia, Malaysia, and Taiwan. By contrast, there have been fractional increases in Thailand and the Philippines. Moreover, it is important to note that China’s state-owned enterprise sector has reduced headcount by over 60 million workers since 1997 — creating an enormous pool of unemployed workers that are seeking gainful re-employment in China’s new economy. At the same time, the Chinese leadership has emphasized the expansion of the labor-intensive services sector as a key element of the just-enacted 11th Five-Year Plan. If China were seriously worried about labor shortages, it would have stayed the course with an increasingly capital-intensive, labor-saving manufacturing model. All this is not to say there aren’t skill mismatches and other frictional dislocations that arise from time to time in any economy — including China. For example, I continue to hear anecdotal reports of shortages of young women needed for employment in China’s rapidly growing textile industry. But these are the exceptions, not the rule, for a nation that continues to have a rural population of some 745 million — by far, the largest pool of surplus labor in the world.
All this underscores the critical role China continues to play in driving the global labor arbitrage — the cross-border migration of production from high-cost to low-cost labor pools. China’s enormous reservoir of low-wage factory workers underscores the enduring potential power of this arbitrage. A companion study published by the BLS puts overall manufacturing employment in China at 109 million in 2002 — more than double the total factory employment of 53 million for all of the G-7 economies of the industrial world, combined (see Judith Banister, “Manufacturing employment in China,” from the July 2005 issue of the Monthly Labor Review). Nor should the arbitrage be viewed as something that just takes place at the low end of the occupational hierarchy. Currently, about 550,000 newly trained engineers and scientists graduate each year from Chinese universities; in India, the count of such graduates is around 700,000 per year. For China and India, combined, this represent a trebling over the past decade in the entry flow into this segment of their high-skilled talent pool — pushing their combined flow of new graduates in engineering and science to about three times that in the United States. Courtesy of IT-enabled offshoring, the global labor arbitrage is now at work in this segment of the occupational hierarchy, as well.
I continue to believe that the hyper-speed of IT-enabled globalization is one of the most destabilizing aspects of the global labor arbitrage. Pressures on workers have moved rapidly up the value chain from manufacturing into once nontradable services. Downsizing and wage compression are no longer just a blue-collar phenomenon. Long-sheltered knowledge workers are now being impacted by globalization for the first time ever. While the economic logic of these shifts is fairly easy to grasp, the sociology and politics are not. Gains in Chinese incomes and living standards have translated into powerful headwinds for wages and labor income generation in the developed world. Therein lies the dark side of the global labor arbitrage: With economic recoveries in the high-wage industrial world becoming increasingly jobless, or wageless, or both, the destructive forces of protectionism have reared their ugly head in both the United States and Europe. That’s hardly an inconsequential development for a world beset with record current account imbalances.
The power of the global labor arbitrage has not been diminished by Chinese wage inflation. This could well be a key test of the world’s commitment to globalization. For its part, China needs to do a better job in understanding the global implications of its dramatic emergence. And we in the developed world need to do a better job in equipping our workers with new skills and tools to meet the global challenge head on.
作者：TooSimple 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 China and the Global Labor Arbitrage ZT -- TooSimple - (10513 Byte) 2006-4-20 周四, 04:45 (1078 reads)
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