Pay Hike

Counting the cost of rising wages in Chinese industry

(China Daily)
Updated: 2010-06-30 10:18

Tao Dong, chief Asia economist of Credit Suisse

The recent suicides at Foxconn, the Taiwan-owned electronics manufacturer, signaled the end of an era on the mainland. Its role as the world's factory and the export-driven model of economic growth are being challenged by rising wages and a labor shortage in coastal areas.

This "world factory" status has been built with the sweat and blood of those migrant workers, who, through their hard labor, have earned themselves a basic standard of living, but brought exorbitant profits for US and European brand owners.

Unlike their parents, those young migrant workers who were born in the 1980s and 1990s have higher expectations and they will no longer put up with poor living conditions. This trend has fundamentally changed the country's labor market where cheap labor is no longer an inexhaustible resource and labor shortages are becoming an increasingly common phenomenon.

Related readings:  Young migrant workers have 'high expectations'  Higher taxes for rich, better wages for poor  Demand for skilled labor set to fuel higher wages: Poll  Minimum wages rise in 11 provinces

It is estimated that the wages of Chinese migrant workers will rise by 20 to 30 percent in the next three to four years. Policymakers are attaching more importance to safeguarding workers' interests and dignity.

The Chinese government is gradually shifting its focus from rapid economic growth to a better distribution of wealth, which is vitally important as it increases consumption and thus benefits economic growth.

It has become a must for China to restructure its economy. In the coming years, China has no choice but try to increase consumption; otherwise, its growth rate will drop.