China Wages Vs Us Wages

[ralphmalph]

http://ftalphaville.ft.com/blog/2011/05/06/562241/the-possible-future-of-us-manufacturing/

China is not getting the productivity increases to compete with wage inflation. Chuck in oil at 100 bucks and it is cheaper to make goods again in the west.

[R K]

They're toast.

Who knew.

[LJAR]

They're toast.

Who knew.

anyone who can remember the predictions about russia or japan?

edit - I was talking to someone the other day who had done some work in china, and apparently they dont even have a word for the concept of "productivity" or "efficiency" the chinese words just mean "chuck more labour at it"

given that most increases in output are because of innovation and increases in productive efficiency. (see the fact that UK industrial output is now higher than it has ever been despite employing fewer people) they are toast.

Wait for the rise of India I think - english speaking, entrepreneurial, and tech savvy. hmmm.

Edited May 6, 2011 by LJAR

[scepticus]

http://ftalphaville.ft.com/blog/2011/05/06/562241/the-possible-future-of-us-manufacturing/

China is not getting the productivity increases to compete with wage inflation. Chuck in oil at 100 bucks and it is cheaper to make goods again in the west.

Good link. Of course this means the age of cheap tat is over, to be supplanted presumably by expensive tat.

Inflation plus wage inflation in the west sometime around 2020.

Makes sense.

[montesquieu]

anyone who can remember the predictions about russia or japan?

edit - I was talking to someone the other day who had done some work in china, and apparently they dont even have a word for the concept of "productivity" or "efficiency" the chinese words just mean "chuck more labour at it"

given that most increases in output are because of innovation and increases in productive efficiency. (see the fact that UK industrial output is now higher than it has ever been despite employing fewer people) they are toast.

Wait for the rise of India I think - english speaking, entrepreneurial, and tech savvy. hmmm.

India's future was never in call centres replacing Newcastle, Glasgow and Liverpool ... but in more advanced stuff, software engineering, R&D and so on ... but what's happened with currency movements and relative wage inflation is that the premium for western developers has been eroded markedly.

Take out the cost of remote management (packaging stuff up for offshore delivery is labour intensive and risky) and the fact a lot of these guys have no real-world experience, and the whole exercise is already borderline.

A few more years of real wage falls in the west and India has a much harder time fulfilling its promise than anyone anticipated a few years ago,

Edited May 7, 2011 by montesquieu

[mfp123]

some of you have a far too simplistic view of the actual wage disparity that exists.

these countries are developing countries. average wages are $2000 per year vs $35,000 per year in the UK.

wage inflation in the developing world is not a "problem" for them, it is a reflection on the advancement in their quality of life due to the strengthening of their economy.

rising wages doesnt just mean they are losing their competitive advantage - it is an indicator of their economic development. their ultimate aim is to increase the value of their wages.

if you think their economies will struggle because of rising wages, then their wages will simply fall back down again if their economy becomes weak.

you also cannot compare like for like saying india and china are rubbish because our technology is better - we are not even in the same economic cycle - they are in the phase of industrialisation, they are like america in the early 1900's when their whole society starts to develop.

watching brazil, india and china right now is like looking in the past, at the same way in which america started to drive the world economy.

Edited May 7, 2011 by mfp123

[shark99]

edit - I was talking to someone the other day who had done some work in china, and apparently they dont even have a word for the concept of "productivity" or "efficiency" the chinese words just mean "chuck more labour at it"

Hmm, not sure about that, there is a perfectly good Chinese word for efficiency - 效率 (pinyin: xiào lǜ). It's composed of the characters 效 (effect) and 率 (rate).

However, there may be some cultural truth in what your acquaintance says - my experience of working in China leads to me think that there are two areas where China could improve productivity; firstly, there is a culture of "the boss is always right" which means that no-one ever suggests a better way of doing things to their superiors (or even points out that an idea is catastrophically bad!), and secondly that there is perhaps too much of an emphasis on being seen to be working as opposed to actually achieving anything useful - there were a lot of guys who would hang around doing very little from 5pm - 7pm, simply because they didn't want to leave before the boss did.

[Democorruptcy]

Good link. Of course this means the age of cheap tat is over, to be supplanted presumably by expensive tat.

Inflation plus wage inflation in the west sometime around 2020.

Makes sense.

According to the budget red book wage inflation starts stoking from 2013-14 with 5.1% and then up up up but CPI is magically held at 2% forever.

[OnlyMe]

some of you have a far too simplistic view of the actual wage disparity that exists.

these countries are developing countries. average wages are $2000 per year vs $35,000 per year in the UK.

wage inflation in the developing world is not a "problem" for them, it is a reflection on the advancement in their quality of life due to the strengthening of their economy.

rising wages doesnt just mean they are losing their competitive advantage - it is an indicator of their economic development. their ultimate aim is to increase the value of their wages.

if you think their economies will struggle because of rising wages, then their wages will simply fall back down again if their economy becomes weak.

you also cannot compare like for like saying india and china are rubbish because our technology is better - we are not even in the same economic cycle - they are in the phase of industrialisation, they are like america in the early 1900's when their whole society starts to develop.

watching brazil, india and china right now is like looking in the past, at the same way in which america started to drive the world economy.

They also have the headroom to tool, mechanize, automate - they can get away with throwing bodies and labour time at a problem now, but they have a route to maintain competitive advantange IF they don't allow a bubble like a land.housing bubble destroy that advantage. Many western companies alre already running somehwat close to peak efficiency that they could possibly run at, there is no wriggle room and their capital & fixed costs / reat / rate / read tape / administration / costs are what eats up their margins this is before some stupid govt goes and slaps a carbon emmissions levy on them. The companies that haven't invested and rely on cheape imported labour neither have the propoensity or ability to tool up if they haven't done so yet - so they have no wriggle room either.

[ken_ichikawa]

The problem is not wages. The problem is that outsourcing production is merely a stopgap for the lack of a technical solution.

When a technological solution is found production is shifted elsewherem, doesn't mean jobs come back though.

Carpet manufacture loads of factories in Turkey and India as it was labour intensive..

Then the Germans designed this massive machine which was fully automated, it even loaded itself which made carpet extremely wide and extremely fast with no flaws. One engineer who also loaded and unloaded the machine was all that was needed to watch over the machine.

[Pauly_Boy]

A key thing is that it also fails to mention the probably weakening of the doller : Yuan exchange rate, making the US more competative.

[ken_ichikawa]

A key thing is that it also fails to mention the probably weakening of the doller : Yuan exchange rate, making the US more competative.

But does it? In that you inflate = your costs go up as your staff now need more $ to make it worth their while. Therefore you have to increase wages or automate.

[Game_Over]

Good link. Of course this means the age of cheap tat is over, to be supplanted presumably by expensive tat.

Inflation plus wage inflation in the west sometime around 2020.

Makes sense.

Err......

What happened to Deflation?????????

[Game_Over]

And ever since I started posting here I have been explaining why China will never be a global superpower.

And the same factors also apply to India.

These are both incredibly old societies that have reached the limits of their resources, unlike countries like the US, Canada and Australia.

Both China and India will spend the next 100 years struggling just to get their citizens standard of living to what it was in the West in the 1950's.

1 billion people means you have a 'large' economy - it doesn't mean you are rich, or a global superpower

[dom]

Wait for the rise of India I think - english speaking, entrepreneurial, and tech savvy. hmmm.

Less than 1% of the population fall into that category. As a nation they can't even look after themselves. It's a joke.

[OnlyMe]

And ever since I started posting here I have been explaining why China will never be a global superpower.

And the same factors also apply to India.

These are both incredibly old societies that have reached the limits of their resources, unlike countries like the US, Canada and Australia.

Both China and India will spend the next 100 years struggling just to get their citizens standard of living to what it was in the West in the 1950's.

1 billion people means you have a 'large' economy - it doesn't mean you are rich, or a global superpower

The west will struggle to get their citizens the standard of living they had in the 50's.

Think single earner funding household with multiple children, plus company pension, etc going into the 60's, 70's, 80's with a fair degree of confidence in a career and reasonably stable employment till retirement.

Edited May 7, 2011 by OnlyMe

[Game_Over]

The west will struggle to get their citizens the standard of living they had in the 50's.

Think single earner funding household with multiple children, plus company pension, etc going into the 60's, 70's, 80's with a fair degree of confidence in a career and reasonably stable employment till retirement.

Well everything is relative.

For example - in an 'age of austerity' in a democratic, capitalist economy, ordinary people still have a far higer standard of living than the best any socialist society has ever managed to provide.

Even if we have 20 years of austerity - we won't all be driving round in Trabants, paying a months wages for a pair of jeans and swapping dud light bulbs with ones from work.

[cashinmattress]

http://ftalphaville.ft.com/blog/2011/05/06/562241/the-possible-future-of-us-manufacturing/

China is not getting the productivity increases to compete with wage inflation. Chuck in oil at 100 bucks and it is cheaper to make goods again in the west.

I don't know.

The 'West' we speak of is nothing more than a cabal of global bankers and corporations, and the citizenry of the flag waving western states (generally speaking) have long moved on to net importation and wholesale consumerism.