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The Masked Tulip

Shanghai To Hike Minimum Wage By 10%

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...and what affect will that have oin corporate earnings and wages and spending... and stuff...

Shanghai just announced it will hike minimum wages by 10%. This also means that labor costs are about to surge, corporate margins for Chinese corporations will plummet, and CEOs will be forced to sell their trinkets to the US at higher prices to offset the margin plunge. Which in turn means prices for "commodity" made in Wal Mart prices will be forced to also go much higher, setting off screams about wage hikes in the US, which in turn will force either US companies to see margins drop even more, or the Fed to assume that it has to offset the resulting equity weakness with more money printing. In other words, bad news all around.

http://www.zerohedge.com/article/shanghai-hike-minimum-wage-10

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...and what affect will that have oin corporate earnings and wages and spending... and stuff...

http://www.zerohedge.com/article/shanghai-hike-minimum-wage-10

10% on UK factory worker wages would hardly make any difference to the finished goods price. Why do they think it would for goods from a country where they are paid a tenth of our workers wages?

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10% on UK factory worker wages would hardly make any difference to the finished goods price. Why do they think it would for goods from a country where they are paid a tenth of our workers wages?

It won't on its own but its the thin end of the wedge IMO.

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Y'know, maybe all the hyperinflationistas and proponents of a crack-up boom have been looking in the wrong place...

Indeed.

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If china keeps growing as fast as it does the wages will become equal to that of the west, not only this but the billions invested by western companies specially now will be lost in a few years.

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Amazing China has 10% growth for 2010 and now wages go up by 10%, it's almost like there is no growth just inflation even though official inflation is only at around 4-5%.

However I'm sure I'm being cynical and it's just coincidence growth is 10% and wages are going up by 10%, inflation will clearly be under control.

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If china keeps growing as fast as it does the wages will become equal to that of the west, not only this but the billions invested by western companies specially now will be lost in a few years.

Not quite, the HUGE problem in western economies is uber high cost of living, because there is uber cost of living people demand uber amounts of money or try to. In all of Asia (modern and developing i.e. Tokyo Seoul Beijing) 1/16th-1/5th of a persons take home pay is taken up in housing costs.

I can stay in downtown Seoul or Tokyo in reasonable comfort for a couple quid a day. Can you say the same about the UK? In the UK you get things like holiday inn places which are £50 a night. Hop over the channel and you get hotel F1 for 30 Euros. Fly all the way to HK the MOST expensive place for land and you can get even better accomodation for £6 a day. What can you get (all in) for £6 a day in the UK? Even a bed in a hostel in the UK costs £13 a day.

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There is constant upward price pressure on imported Chinese goods and it's driven far more by wage increases over there at the moment rather than commodity prices.

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If china keeps growing as fast as it does the wages will become equal to that of the west, not only this but the billions invested by western companies specially now will be lost in a few years.

They'll face their own problems with off-shoring and automation long before wages reach parity with the west.

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There is constant upward price pressure on imported Chinese goods and it's driven far more by wage increases over there at the moment rather than commodity prices.

Surely the impact should be minimal, since the producer's wage cost is such a minuscule input to the retail price in a western shop?

I guess the figures vary, but for example a 10% rise in a 10% price component (producer wages) is a mere 1% on the overall price, and TBH I would be surprised if the producer's wages were as much as 10% of that

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I read somewhere that chinese wages could double and the prices to us westerners would still be rather small because wages are so low, the sad thing is the poor buggers cost of living would double too so no winners really?

Also, I doubt the majority of factory jobs are in Shanghai city ?

Edited by jones87

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Surely the impact should be minimal, since the producer's wage cost is such a minuscule input to the retail price in a western shop?

I guess the figures vary, but for example a 10% rise in a 10% price component (producer wages) is a mere 1% on the overall price, and TBH I would be surprised if the producer's wages were as much as 10% of that

I'd say, as a general rule, when you look at the cause behind significant price rises of goods, particularly those with a large degree of hand finishing, wages are at the root of it.

Don't forget, in this country, businesses have to make their own employer's NI contributions.

With retail it's all about price points. If my FOB cost is <30p and it's a volume line it'll be a 99p line. Pushes over 30p and it's a £1.29 line and likely a £1.49 line if the till data doesn't suggest any significant drop in volume.

I read somewhere that chinese wages could double and the prices to us westerners would still be rather small because wages are so low, the sad thing is the poor buggers cost of living would double too so no winners really?

Also, I doubt the majority of factory jobs are in Shanghai city ?

They're not, they're in Guandong province which contains the lion's share of the special economic zones.

However, there are still the same big upward pressures on wages there.

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I'd say, as a general rule, when you look at the cause behind significant price rises of goods, particularly those with a large degree of hand finishing, wages are at the root of it.

Don't forget, in this country, businesses have to make their own employer's NI contributions.

With retail it's all about price points. If my FOB cost is <30p and it's a volume line it'll be a 99p line. Pushes over 30p and it's a £1.29 line and likely a £1.49 line if the till data doesn't suggest any significant drop in volume.

Fair points - but these are western retailer domestic business issues not producer inputs

As per you last point the selling price is what the market will bear; more influenced by the state of domestic demand than offshore production costs.

What's likely given recent trends is that the step rise in cost of essential commodities (driven by Chinese inflation) will squeeze discretionary spending and hence retailers will have pressures from both ends of the equation. The far east margin multiplier is coming to an end it seems.

For a country with an economy based on Housing and Shopping I guess we are looking pretty f*cked

Edited by Sonic the Hedge Fund

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so they get 33p an hour instead of 30p

big whoop , should not affect prices

It is, and is having a massive upward effect.

People seem to get a bit lost with this when talking about minimum wages in supermarkets etc.

The largest factor affecting the cost of an item you put in a carrier bag at the checkout is how much the people involved in getting the product there are paid. That is predominantly what you're buying,the labour of other people, although the product is in physical form.

Watch the prices of clothing tick up in the next few months. It's got little to do with vat or oil price increases and everything to do with factory workers pay rates.

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Watch the prices of clothing tick up in the next few months. It's got little to do with vat or oil price increases and everything to do with factory workers pay rates.

Yeah i'm sure the rise in clothing prices has nothing at all to do with cotton prices hitting record highs...

http://www.dailytimes.com.pk/default.asp?page=2011\01\21\story_21-1-2011_pg5_9

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I'd say, as a general rule, when you look at the cause behind significant price rises of goods, particularly those with a large degree of hand finishing, wages are at the root of it.

Don't forget, in this country, businesses have to make their own employer's NI contributions.

With retail it's all about price points. If my FOB cost is <30p and it's a volume line it'll be a 99p line. Pushes over 30p and it's a £1.29 line and likely a £1.49 line if the till data doesn't suggest any significant drop in volume.

They're not, they're in Guandong province which contains the lion's share of the special economic zones.

However, there are still the same big upward pressures on wages there.

Again people have hefty personal allowances thus many people do not pay tax! Compare to min wage in the UK who are gouged on taxes from multiple angles

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Yeah i'm sure the rise in clothing prices has nothing at all to do with cotton prices hitting record highs...

http://www.dailytimes.com.pk/default.asp?page=2011\01\21\story_21-1-2011_pg5_9

I'm sure too.

The only story on imported goods at the moment is factory wage rate increases feeding through to higher gate prices.

Look at steel prices for the last decade it only affected european manufacturers, deflation was still the order of the day amongst Far East manufacturers.

Bear in mind from a PR point of view public facing businesses are unlikely to issue press releases blaming factory worker wage increases.

Commodities will, most likely, be a good inflation hedge investment but, they are a red herring regarding significant price increases on consumer goods.

It's part of a flawed, soppy western liberal idea that Chinese factory workers can be paid better rates without it being significantly disadvantageous to low paid western consumers.

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They'll face their own problems with off-shoring and automation long before wages reach parity with the west.

Which is why the globalist tide will not lift all boats- not until we run out of desperately poor people to exploit- but the robots will probably be serving in costa before that happy day arrives.

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A large number of people getting a pay rise = Inflation for the whole planet!

You China bashers are something else...

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