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Labor competition in Asia

low-wage_labor_in_china's_neighborhood.png

By Ezra Klein

In the category of "things that concern the Chinese but would confuse Americans," we've been hearing a bit about how Chinese wages are threatening to get to the point that the jobs would move elsewhere. That doesn't make much sense to our ears -- how can it get cheaper than China? -- but if you look at the graph atop this post, it really is true that the Chinese economy is rapidly outpacing its neighbors, and that could mean that some of the low-wage work begins to migrate to lower-wage countries.

On the other hand, China is a wildly unequal society, so looking at GDP per capita might overstate the situation: Jobs can just move from the prosperous coastal cities into the poorer interior, rather than heading all the way to Vietnam.

One thing I don't know is whether the technological advances in transporting goods and communicating with suppliers make it harder for low-wage countries to develop. Back before you could easily ship stuff and talk to people far away, it wasn't worth moving your factory to a whole other country just to save a few bucks on labor costs. It's presumably easier to do these days, and a slack global economy might push companies in that direction. At the very least, this sort of pressure explains why it's important for China -- and other developing nations -- to move rapidly up the value chain. You can't rely on low-wage labor while raising living standards forever. You may not even be able to do it for very long.

By Ezra Klein  |  June 1, 2010; 12:16 PM ET
Categories:  China  
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Comments

Interestingly, as measured by the (admittedly imperfect) Gini coefficient, our society is as "wildly unequal" as theirs.

http://en.wikipedia.org/wiki/Gini_coefficient

Posted by: CarlosXL | June 1, 2010 12:59 PM | Report abuse

Ezra Klein is a Communist Dupe! ;)

Sorry, I just wanted to be the first one to get that in on this post. Proof he's a Communist dupe? He's writing about China.

Posted by: Kevin_Willis | June 1, 2010 2:12 PM | Report abuse

Matt Yglesias pointed out that

"... China is still quite a bit poorer than Costa Rica or Bulgaria on a per capita GDP basis whether you go by nominal or PPP-adjusted GDP."

That fact helps put the relative per capita GDP throughout Asia in perspective.

Posted by: Patrick_M | June 1, 2010 2:14 PM | Report abuse

"looking at GDP per capita might overstate the situation: Jobs can just move from the prosperous coastal cities into the poorer interior, rather than heading all the way to Vietnam." Gee, I wish this fact had come up during the health care debate: I wonder why such logic is acknowledged in China but is disavowed (by Progressives) when applied to the United States --

Posted by: rmgregory | June 1, 2010 3:37 PM | Report abuse

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