As China’s Manufacturing Wages Rise, Will Companies Go Elsewhere?

Most of us are used to seeing the phrase ‘Made in China’ on our goods on the consumer side and business side while shopping. With all the manufacturing and jobs that have been created in China, more and more people have seen increases in their wages and spending power.

Wage Growth

    China’s wages have continuously grown over the past decade and in 2016 hit $3.60 an hour. That wage is on par with countries such as Portugal and South Africa, and more than five times the wage of India. As China’s economy has rapidly expanded their economy, companies are starting to feel the pinch they looked to avoid by investing in the country years ago.

Economics of Growth

    As China’s GDP started to grow and more investments were made in their economy, many pointed to that development leads to higher wages. Noble winning economist Paul Krugman stated that when a country becomes as developed as the United States, then payments will be similar to the United States. As a result of the higher wages, China’s industrial robotics industry has seen significant growth to sell products to companies looking to replace workers.

Where will the jobs go next?

    With China’s wages rising, robotics on the rise, where will the jobs be placed next? Many are pointing to countries like Vietnam, Sri Lanka, and India. As China continues to have issues with language barriers, intellectual property robbery, and trade manipulation many companies are looking toward India where the wage gap is still significant, English is the spoken language, and government intellectual property protection is taken seriously. Also, Vietnam is an up-and-coming country that is included in the Trans-Pacific Partnership trade agreement, is close to many Chinese manufacturing centers, and is developing quickly. Sri Lanka still has an average hourly wage of $.50, and many companies are looking there as a possible destination.

What’s Next?

    Many in China are trying to combat the rising risk of losing jobs to outsourcing by investing and easing financial restrictions for outside nations and companies. If China lost millions of jobs to companies investing in robotics and outsourcing manufacturing, millions of people would be unemployed. China is already dealing with a large unemployment number and is trying to create white collar jobs, but upward mobility takes time, and as China’s wages continue to grow, it will be seen if they can save their jobs.