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Labor in China

October 15, 2010

Filed under: manufacturing — Terry Wohlers @ 16:07

The inevitable is underway: the cost for labor in China is rising. The reason, according to Leland Teschler, editor of Machine Design, is that the surplus labor from the countryside is drying up. In his August 2010 editorial titled Cheap labor in China? Not for long, Teschler said, “China is simply following the same path as other early industrial economies, in which a traditional agricultural sector exists along with a modern industrial sector in the cities.”

Teschler explained that at some point, demand exceeds supply and it’s happened before. He cites the UK’s first industrial revolution of the 1840s and Japan in the 1960s. China is on a similar path to wage growth that will increase the cost of manufacturing. “The number of young workers entering the labor force is set to drop by one-third over the next dozen years,” he stated.

Economists, according to Teschler, believe that the Chinese will grow only if it can improve efficiency. It’s unclear whether a country whose recent history has been characterized by throwing more people at a problem can swiftly transition to one of higher productivity.