A wage revolution could end extreme poverty in Asia(oxfamblogs.org)
oxfamblogs.org
A wage revolution could end extreme poverty in Asia
http://oxfamblogs.org/fp2p/a-wage-revolution-could-mean-the-end-of-extreme-poverty-in-asia-and-massive-knock-on-effects-for-africa
14 comments
>China's 'reserve army of labor' hasn't necessarily been exhausted yet. Wages in the inland provinces still lag those found in the coastal provinces, and
Inland province wages lag because building a factory in backwater China guarantees that you will be cut off from China's industrial infrastructure and your shipping costs will skyrocket. Hence no jobs there. If you want a job, you move to the coast.
Those regions really can't compete with places like Vietnam or Bangladesh that have access to a decent port AND have the same level of wages. Their best hope for rising wages is still from migrant workers funneling cash home.
>government policy is at least nominally trying to encourage investment and development there in an effort to close the gap.
I don't think it's really working. A large proportion of that investment (if not most) is being blown on useless projects and siphoned off by corrupt local government officials and their cronies. Worse, it's (nominally, at least) debt driven investment, too, so the provinces will need enormous bailouts or stimulus at some point if they are not going to suffer a crippling depression.
This happens in coastal China too, but the corruption and level of malinvestment isn't nearly as bad.
I think on some level inland China will always be very poor. I can well imagine quality of life in coastal Chinese cities overtaking the US and Bangladeshi/Vietnamese cities moving to first world status while dire poverty still exists in the Chinese countryside.
Inland province wages lag because building a factory in backwater China guarantees that you will be cut off from China's industrial infrastructure and your shipping costs will skyrocket. Hence no jobs there. If you want a job, you move to the coast.
Those regions really can't compete with places like Vietnam or Bangladesh that have access to a decent port AND have the same level of wages. Their best hope for rising wages is still from migrant workers funneling cash home.
>government policy is at least nominally trying to encourage investment and development there in an effort to close the gap.
I don't think it's really working. A large proportion of that investment (if not most) is being blown on useless projects and siphoned off by corrupt local government officials and their cronies. Worse, it's (nominally, at least) debt driven investment, too, so the provinces will need enormous bailouts or stimulus at some point if they are not going to suffer a crippling depression.
This happens in coastal China too, but the corruption and level of malinvestment isn't nearly as bad.
I think on some level inland China will always be very poor. I can well imagine quality of life in coastal Chinese cities overtaking the US and Bangladeshi/Vietnamese cities moving to first world status while dire poverty still exists in the Chinese countryside.
Minor point: as to
> China's 'reserve army of labor' hasn't necessarily been exhausted yet. Wages in the inland provinces still lag those found in the coastal provinces
Wages in the inland provinces will, most likely, always lag the coastal provinces, for the same reason that wages in the inland provinces of the US lag coastal wages. The ocean brings commerce; commerce is money.
> China's 'reserve army of labor' hasn't necessarily been exhausted yet. Wages in the inland provinces still lag those found in the coastal provinces
Wages in the inland provinces will, most likely, always lag the coastal provinces, for the same reason that wages in the inland provinces of the US lag coastal wages. The ocean brings commerce; commerce is money.
It's an interesting trend. I wonder if it might come too late. We're seeing an up-tick in automation. More and more menial jobs are becoming automatic. The labour force on the low end is not as needed. I wonder what will happen if the industrialist in the Asian countries gain enough capital to buy heavy equipment. Will the wage trend continue grow?
>We're seeing an up-tick in automation.
We're actually not. Current trade policy discourages automation by pushing manufacturing to low wage countries attempting export led growth instead. Those jeans you're wearing? Those toys in the store? Mostly assembled by a person I'm afraid.
Those menial jobs are not being done by robots they are being done by cheap factory workers in Bangladesh, China, Vietnam, Mexico, etc.
The US has actually had an uptick in the number of menial jobs created since the recession and a downtick in the number of skilled jobs.
I think this "automation has accelerated since 2008" meme is simply a convenient excuse for the lost jobs that shifts blame away from the people who actually caused it. Similar to the "banning redlining caused the housing crisis" meme.
We're actually not. Current trade policy discourages automation by pushing manufacturing to low wage countries attempting export led growth instead. Those jeans you're wearing? Those toys in the store? Mostly assembled by a person I'm afraid.
Those menial jobs are not being done by robots they are being done by cheap factory workers in Bangladesh, China, Vietnam, Mexico, etc.
The US has actually had an uptick in the number of menial jobs created since the recession and a downtick in the number of skilled jobs.
I think this "automation has accelerated since 2008" meme is simply a convenient excuse for the lost jobs that shifts blame away from the people who actually caused it. Similar to the "banning redlining caused the housing crisis" meme.
We are probably long overdue a relative price drop on all the products that have had substantial automation. Once enough businesses catch up the price competitions should restart -- for now it's just the first ones past the mark reaping larger benefits.
products such as?
Buried lede is how far India is lagging.
Rural wages "[d]oubling in China in the last decade, tripling or quadrupling in Vietnam. A bit slower in Bangladesh, but still up by half."
And yet the chart at the bottom shows India up by only 35%.
Rural wages "[d]oubling in China in the last decade, tripling or quadrupling in Vietnam. A bit slower in Bangladesh, but still up by half."
And yet the chart at the bottom shows India up by only 35%.
What an odd title. Higher wages could end poverty, which is defined by, you guess it, wages?
The more interesting thing here would be: are wages rising as fast as we would expect them to? I'm pretty sure even the most incompetent administration can't possibly produce both a system that grows the economy by double digits yearly yet keeps wages low, and still stay in power.
But there are certainly ways a countries administration can go to make the upswing benefit only parts of society, and benefit those already in the higher echelons vastly more than those lower.
The more interesting thing here would be: are wages rising as fast as we would expect them to? I'm pretty sure even the most incompetent administration can't possibly produce both a system that grows the economy by double digits yearly yet keeps wages low, and still stay in power.
But there are certainly ways a countries administration can go to make the upswing benefit only parts of society, and benefit those already in the higher echelons vastly more than those lower.
If I understand it correctly, it's that higher wages in China could end poverty in other places too. Because China will import more things from those countries, and factories will move there to the lower wages.
Yep, Africa is the last stop in the race to the bottom. Manufacturing won't happen though without a stable infrastructure such as transportation and electricity, and never mind being necklaced or macheted.
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A lot of Africa also suffers from Dutch disease and the resource curse.
Capital flight has been the main problem facing the African nations. Money leaves the economies faster than trade and aid comes in. Still, at least the British, US & Swiss shadow banking system is doing well /s
1. China's 'reserve army of labor' hasn't necessarily been exhausted yet. Wages in the inland provinces still lag those found in the coastal provinces, and government policy is at least nominally trying to encourage investment and development there in an effort to close the gap. Smaller countries looking to jump-start their economies through export-driven industrialism may still need to compete with those provinces and should keep in mind their advantages and disadvantages (e.g. high freight costs).
2. It isn't enough for high wages alone to drive low-paying factory work out of China, Vietnam, or the other major manufacturing nations. Quality infrastructure, a reasonably well-educated workforce, political stability, etc are all contributing factors. Leaving aside the debate over whether export-driven industrialism is good or not, rising wages provide an opportunity for smaller countries to capture these jobs, but only if they take the initiative.