China Losing Low-Wage Apparel Jobs To Bangladesh And Southeast Asia

For whatever reason, commodity apparel manufacturing represents the very lowest-end of the industrial food chain. These are the worst-paid, most labor-intensive jobs out there. They were the jobs that powered the original Industrial Revolution in the United Kingdom, they were the first jobs to start fleeing western countries, they were key to the early stages of catch-up growth in places like Korea and Taiwan, and after China’s “opening up” to commerce and trade they moved en masse to take advantage of the PRC’s vast pool of low-wage labor. But after fifteen years of gangbusters growth combined with a rapidly aging population, Chinese wages are rising and apparel jobs are moving on once again just as they have so many times in the past:

Last week, Jonathan Anderson, a UBS economist, released a report after crunching the numbers of the US and European Union’s import data for the first half of 2011. He found China’s light manufacturing share is starting to decline from more than 50 per cent to about 48 per cent. The beneficiaries include Bangladesh (up 19 per cent in exports to the US) and Vietnam (16 per cent). The first half of 2011 “looks a pretty convincing turning point”, says Mr Anderson of a shift in labour-intensive manufacturing to south-east Asia. India and the Philippines, by contrast, which should be “natural destinations” for labour-intensive investment, appear to be sitting out the action, he says.

When contemplating the post-industrial blues it is worth recalling that nobody feels wistful about the “good jobs” in the apparel sweatshops of yore. We remember instead the Triangle Shirtwaist Factory fire. Relative to an extremely low level of economic development associated with widespread subsistence agriculture this sort of work is a step forward and hopefully the rise of light manufacturing in Bangladesh and Vietnam will power those countries on to better things in the future. But the goal is always to do what Japan, and then Korea and Taiwan, and now China are doing — move up to the next rung on the wage/skill ladder, not desperately try to find some way freeze the jobs of yore in place.

Our problem in America isn’t that the economy is transforming. It’s that the economy isn’t transforming fast enough to create rising wages in the face of an expanding global labor pool.