China is raising its wages at a pace that should enable the US to compete for manufacturing in the year 2525, if man is still alive.
There’s some good news and bad news from China this week. The good news is that the minimum wage in Guangdong Province will rise by 21 percent from May.
The bad news is that the minimum wage in Guangdong Province will rise by 21 percent from May.
It all depends on which side of the factory’s wage table you are standing on at the end of every week.
Guangdong is home to the Pearl River Delta, or PRD, that is the manufacturing heartland of China. Factory owners in the PRD, tens of thousands of them from Hong Kong, are bleating that they cannot afford such a huge wage hike.
“We can’t transfer the extra costs to buyers – that will make us less competitive,” they complain.
It is indeed a sad day for the margins of Hong Kong’s billionaire tycoons that have been churning out cheap junk for the world for years. Down in the exclusive private clubs of Hong Kong where people still wear smoking jackets and smoke cigars indoors they are weeping into their 100 year old Henri IV Dudognon Heritage cognac (I had to look that up. At US$2 million a bottle it is beyond the means of even a Maritime Professional).
But before you shed tears for the cash-strapped tycoons, let’s add some context.
Here are the minimum wage increases announced this week by the Guangdong Labour and Social Security Bureau. In Guangzhou, the provincial capital, the minimum wage will be US$150 a month; Zhuhai, Foshan, Dongguan and Zhongshan US$134 a month; Shantou, Huizhou and Jiangmen US$118 a month. Nowhere will employers be allowed to pay less than US$96 a month.
The new average wage – the one that factory owners are warning will remove their competitive edge – will be US$100 a month. How labourers can exist, and even send money home, on a salary of US$100 a month is a complete mystery.
The entire outsourcing/offshoring model is built on cheap Chinese migrant labour that for years have been vulnerable to ruthless bosses. No wonder US manufacturers get all worked up about it. Even after a 21 percent raise, labourers are still working six days a week for US$1,200 a year. Even the lowest McJob in the US pays more than that.
For the last couple of years, Beijing has been trying to upgrade manufacturing along the coastal areas and push the PRD up the value chain. The idea is to force the producers of low value, labour intensive and high polluting goods inland to develop the western provinces.
So now that the Chinese government is belatedly beginning to address working conditions it would be helpful if factory owners shut up about increased costs and spared a thought for the workers who keep filling their coffers.
If it is too expensive to continue making cheap and disposable goods in the PRD, go west, old boys, and don’t let the doors hit you on the way out.