UPDATE: My colleague Austin Ramzy has written a story on this topic. You can read it here.
This morning the New York Times is the latest to ring in with an article about rising wages in China:
The salaries of factory workers in China are still low compared to those in the United States and Europe: the hourly wage in southern China is only about 75 cents an hour. But economists say wage increases here will eventually ripple through the global economy, driving up the prices of goods as diverse as T-shirts, sneakers, computer servers and smartphones.
“For a long time, China has been the anchor of global disinflation,” said Dong Tao, an economist at Credit Suisse, referring to how the two-decade-long shift to manufacturing in China helped many global companies lower costs and prices. “But this may be the beginning of the end of an era.”
This is not a new argument. More than four years ago, BusinessWeek published a story with the headline, “How Rising Wages Are Changing the Game In China.” But recent events, like salary hikes at suicide-prone Foxconn and strikes at Honda plants, are again putting the issue into the spotlight.
This is good news for workers in China, who have long been stuck between the rock of low wages and the hard place of increasing living costs. But could there be broader implications? Could this prompt the world’s corporations to start looking elsewhere for cheap labor?
A recent WSJ dispatch argues that the migration is already underway:
Taiwan Electronic and Electrical Manufacturers’ Association Vice President Luo Huai Jia said Monday the organization, which represents the interests of electronic manufacturers on the island, is encouraging Taiwanese electronics makers to build new facilities in cheaper Asian countries such as Vietnam, India, Indonesia and Malaysia because of rising wages in China.
In 2007, [Foxconn parent company] Hon Hai, which assembles iPods and iPhones for Apple, began to build a new production base in Vietnam to help mitigate rising labor costs in China. Hon Hai also has production facilities in inland China such as Wuhan in Hubei province and Langfang in Hebei province. Compal Electronics, which makes notebook PCs and other electronics for big brands like Hewlett-Packard and Dell, has already completed construction of a notebook manufacturing facility in Vietnam recently, says spokesman Chihming Chang, although mass production hasn’t yet started from the facility.
It’s true—some cheaper labor can be found elsewhere in Asia. But enough to supplant the labor force of a country with 1.3 billion people? I’m guessing not.
Which is why a lot of other articles of late have been bringing up the possibility that we’re going to soon start seeing the cost of our consumer goods rise. Really, that was inevitable. And as I’ve argued in the past, I don’t even think that it’s all that horrible.
