From Chinese Press

Rising labor costs have only just begun

(People's Daily)
Updated: 2010-07-14 09:35

Rising labor cost is a double-edged sword

Labor cost increases will provide more internal drive for China's economic growth. This change is expected to accelerate the pace of transformation in this country and make it become a national consumption-driven economy, according to the Wall Street Journal.

Increases in labor costs are also a double-edged sword.

Wage hikes will reduce companies' profits. It is a huge challenge, especially for those low-end manufacturing industries,

Rising labor costs will have a more direct impact on China's export-oriented economy. Although China's export growth sped up this year, rising prices of raw materials and labor costs will restrict the international competitiveness of Chinese products, so the annual export situation is not optimistic, said Yao Jian, spokesperson of the Ministry of Foreign affairs.

Accelerating economic restructuring, narrowing the gap between the rich and the poor and strengthening the internal driving force of economic growth requires China to step out of cheap labor cost era. However, the excessive growth of labor costs will undermine the competitiveness of industries. Therefore it will cause slow economic growth and reduce employment chances.

Seeking balance between "full employment" and "decent employment"

Since the start of 2010, urban newly-added jobs are on the increase and registered urban unemployment rate is in decline. But China's employment situation remains severe in the short term. To achieve sustainable development of China's economy, seeking a balance point between "full employment" and "decent employment" is a must.

Experts believe China should continue to put employment expansion on the list of priorities. Meanwhile, China should formulate polices and moves to adjust the distribution of national income, gradually increase the proportion of residents income in the distribution of national income and raise labor's share in the initial distribution.