Home > Uncategorized > China’s New Leaders Face an Economic Turning Point – Bloomberg

China’s New Leaders Face an Economic Turning Point – Bloomberg

November 14, 2012 Leave a comment Go to comments

Estimates by Xiaodong Zhu of the University of Toronto provide some sense of how large the historical gains from shifting workers from agriculture to manufacturing have been. In 1978, agriculture accounted for 69 percent of total employment in China. And because average labor productivity outside agriculture was six times as much as inside it, shifting workers across the sectors generated huge productivity gains. By 2007, however, agriculture accounted for only 26 percent of total employment.

As a result, since 1997, migration rates have risen, on average, less than 5 percent a year — down from 10 percent between 1985 and 1997.

At the same time, the relative quality of the migrant workers appears to be declining. For example, their average age has been rising — because most young workers, who presumably are better suited to factory work, have already left.

A slowdown in growth of the pool of productive workers can be expected to generate wage pressures in the coastal manufacturing regions, and that is indeed what Hongbin Li, Lei Li, Binzhen Wu and Yanyan Xiong of Tsinghua University have already found. In 1978, the annual wage of the average Chinese urban worker was $1,004 in 2010 U.S. dollars. By 2010, it had risen to almost $5,500. Wages have grown especially fast for more highly educated workers, but they have risen noticeably for less-educated workers, too. And, somewhat surprisingly, wages are higher at nonexporting companies than at exporting ones.

What’s more, the Tsinghua University researchers say, China is “already experiencing labor shortages.” They point to survey data from China’s Ministry of Human Resources and Social Security suggesting that, in a sample of 117 cities, the number of newly created jobs now exceeds the number of job seekers. In 2001, by contrast, this same survey found that new job seekers exceeded newly created positions by 50 percent.

Not everyone considers this to be evidence that China has reached the Lewis turning point. Jane Golley and Xin Meng of the Australian National University say there is still little to suggest rising wages are the result of a shortage of unskilled labor.

via China’s New Leaders Face an Economic Turning Point – Bloomberg.

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