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China Factories Turn To Undocumented Labor As Local Wages Jump

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http://www.bloomberg.com/news/2013-08-09/china-factories-turn-to-undocumented-labor-as-local-wages-jump.html

China’s embrace of higher wages to help bolster consumer spending has sparked a jump in factories along the east-coast export corridor bringing in undocumented and lower-paid workers from Myanmar and Vietnam.

Border police found 59 illegal immigrants from Vietnam in a bus heading for the Pearl River Delta on July 29, the official Xinhua news agency reported this week. “Thousands” of workers from Vietnam and Myanmar were discovered working illegally in Shenzhen between 2010 and 2012, the China News Service, a state news agency, reported yesterday, citing a local prosecutor.

China, the world’s most populous nation, faces elevated labor costs as the government drives up incomes and the working-age population starts to shrink. While official data show domestic migrant workers currently earn an average 2,477 yuan ($405) a month, some illegal employees made about 1,400 yuan a month in 2011, with 200 yuan of that going to snake-heads, a term for labor traffickers, the China News report said.

..

Employers are happy to hire undocumented immigrants as they don’t have to pay pensions or health-care insurance, China News Service reported.

Are health and pension costs starting to escalate yet in China? They appear to be following the west's examples in other areas of "wealth" creation.

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2,477 yuan ($405) a month attracts 10% income tax thus the take home is around £234.68 per month.

Average UK earnings £26,500 or take home of £1736.48

Now subtract rent and cost of living for each and you will see that the amount left each month is around the same B)

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2,477 yuan ($405) a month attracts 10% income tax thus the take home is around £234.68 per month.

Average UK earnings £26,500 or take home of £1736.48

Now subtract rent and cost of living for each and you will see that the amount left each month is around the same B)

The Chinese can actually purchase more beer on an hours wages than an Englishman. So whilst our pubs are closing whilst our population rises, it wouldn't surprise me for the number of pubs to be increasing in real terms in China.

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Are health and pension costs starting to escalate yet in China? They appear to be following the west's examples in other areas of "wealth" creation.

This is where the 'Socialism Verses Capitalism' debate falls apart. The truth is that you can't have viable demand for goods and services unless some form of shared risk is introduced to offset the cost's of health care and pensions- which means that some degree of social protection is a prerequisite for a thriving free market.

In theory the private sector could deliver this risk sharing function- and it does so reasonably well in some areas such as car insurance. But in areas like healthcare- where complexity is inherently far greater- and in pensions- where the complexity is engineered by the financial sector- we see that rent seeking proliferates to the point where the benefits of sharing the risk become undone by the sheer weight of rent seeking activity that drives up costs.

It's ironic that at a time when the west seems determined to shift all of the risk's of capitalism onto the individual (zero hours contracts being the latest manifestation of this) western economists are calling for China to do the exact opposite and implement exactly the sorts of social protections that are being attacked in the west as a drag on economic growth.

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I would not like to be a new graduate in China now! They have taken our lead, and made too many! :huh:

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It's ironic that at a time when the west seems determined to shift all of the risk's of capitalism onto the individual (zero hours contracts being the latest manifestation of this) western economists are calling for China to do the exact opposite and implement exactly the sorts of social protections that are being attacked in the west as a drag on economic growth.

Not ironic if there intention is to reduce human capital costs here and increase them in china!

More a dastardly scheme!

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Not ironic if there intention is to reduce human capital costs here and increase them in china!

More a dastardly scheme!

We are so lucky being on the winning side.... I always wanted to live in the Victorian era working 6 days a week from 6am to 10pm or later. That's progress.

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