Monday, April 03, 2006

Labor Shortage in China

Now there's a headline I didn't expect to see in my lifetime: "Labor Shortage in China May Lead to Trade Shift", says a newly redecorated New York Times online. (I like the new design. Fewer ads. Less crowded.)

Looks like China is seeing another of the benefits of a free-market development policy. This is a significant one, too, as it addresses some of the major concerns of market skeptics like myself. When markets open up, we expect to see a exploding middle class and a lot of rumbling construction equipment, and these have been around China for a while. Now we are actually seeing upward wage pressure on unskilled workers. The article doesn't present much data, but it does quote a number of market analysts saying that wages are going up for unskilled labor, particularly in the industrial south east, and that many positions are going unfilled. There is also anecdotal evidence that the needs of some of the worst off are being addressed: manufacturers are improving dormitory conditions for migrant laborers, for instance.

I'm not quite ready to chalk one up to the free marketers, though. For starters, although they quote a lot of Goldman Sachs types saying a labor shortage is driving wages upward, the only actual wage data is for three metropolitan areas where the government has legislated higher wages. Also, one of the more prominent causes of the labor shortage is the government’s rural development policy. The government has been using targeted tax breaks to address rural/urban economic inequality, which apparently is managing to keep people back on the farm.

Still. Who’d have thought China would have a labor shortage.

(Also, what is the best way to write the contraction of "who would have"? In speaking, all three words are merged into something like "who'd'uv." Google doesn't register "who'd'uv" though. It likes "who'd have" and "who'd of," but neither of those are quite right. "Who'd have" doesn't recognize the second contraction at all, and "who'd of" substitutes a homophone, rather than writing the contraction.)

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