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Falling Labor Supply in China

Andrew Jacobs in the NYT offers another angle on the story of rising wages in China:

The shortage has emboldened workers and inspired a spate of strikes in and around Zhongshan that paralyzed Honda’s Chinese operations earlier this month. The unrest then spread to the northern city of Tianjin, where strikers briefly paralyzed production at a Toyota car plant and a Japanese-owned electronics factory.

Although the walkouts were quelled with higher salaries, factory owners and labor experts say that the strikes have driven home a looming reality that had been predicted by demographers: the supply of workers 16 to 24 years old has peaked and will drop by a third in the next 12 years, thanks to stringent family-planning policies that have sharply reduced China’s population growth.

Transitions are difficult, but I think you have to judge rising wages in China to be pretty unambiguously a positive development. The labor share of income in China had become terrifyingly low as the country industrialized, so there’s a need for a return to equilibrium. And higher wages will let Chinese factory workers improve their living standards, along with giving countries from Vietnam to India and beyond to get a chance to step onto some of the lower rungs of the manufacturing ladder.

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