« Giant Blowing Sound | Main | Ooops» Russell Roberts
June 08, 2007
Wages in China
Don Boudreaux
Today's New York Times reports that "wages [are] rising 10 percent or more a year in many Chinese cities."
If true -- and, for the reason that follows, I find this stat to be believable -- such a rise in wages is no surprise. Such a rise in wages is the natural result of more market-driven investment, greater commerce, and economic growth.
And if true, this stat is difficult to reconcile with those pundits and politicians who argue that strong, independent labor unions are necessary to ensure that workers enjoy the benefits of economic growth. In China, independent labor unions are illegal. I confess to being no expert on the realities of the operations of labor unions in China, but I suspect that this reality is not remotely close to the model that the Robert Kuttners, Harold Meyersons, Paul Krugmans, John Edwardses -- and John Sweeneys -- among us believe should be adopted in the U.S. so that American workers can prosper.
Wages generally rise -- and wages rise generally -- because of market forces that improve worker productivity and encourage economic change and growth. Labor unions are not the source of a general rise in real wages.
Posted by Don Boudreaux in The Hollow Middle, Work | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/t/trackback/23120/19144810
Listed below are links to weblogs that reference Wages in China:
Comments
Could it be that labor unions do bump up wages and benefits in the industries where they're strongest?
Posted by: David P. Graf | Jun 8, 2007 8:44:16 AM
Possibly, but then they would also depress wages in other sectors -- keeping the average constant, or perhaps lower it through decreased overall average productivity per capita.
Posted by: Wojtek | Jun 8, 2007 8:57:34 AM
Of course, this argument against the inability of labor unions to impact wages assumes that increasing wages is their primary objective.
Of course, while they pay lip service to that, I would say that their primary objective is to:
1. create a group of people who are tethered to and dependent on the union for their livelihood, which
2. consolidates power in the heads of the unions, which
3. provides political capital for those of a particular political party.
Just saying... If you look at it from the perspective that their mission is to increase wages, they have no impact. If you look at it from the perspective that their mission is to create dependency and deliver votes year after year to the Left, they seem to be very successful at that.
Look at what they do and not what they say.
Regards,
St Wendeler
Another Rovian Conspiracy
Posted by: St Wendeler | Jun 8, 2007 9:37:43 AM
Perhaps you overlook the fact that Karl Marx said that the labor union is the most perfect form of communism. Though China's leaders are opening up their economy to a controlled form of capitalism, does this necessarily mean that they have also loosened their grip on their control of labor?
Perhaps the rise in wages is the result of government direction as much as the result of market forces.
I would like to believe that you are correct, but somehow something inside me is still saying probably not.
Posted by: vidyohs | Jun 8, 2007 9:49:09 AM
Vidyohs,
If, as you suggest, the rise in wages is the result of government direction, we should have seen wages rising quickly from the Great Leap Forward to the late 1970s and slowing in recent years. The reality has been entirely the opposite. The rate of wage growth in China didn't begin to take off until the reforms leading to less government direction and more reliance on market forces.
Posted by: James | Jun 8, 2007 12:30:15 PM
St. Wendeler, you mean the unions seek to create a labour monopoly? Of course the do!
And for all the reasons you stated and his previous experience with labour unions in the Soviet Union, my father refused to join one when he came to the United States. He is the only non-union worker in his organization.
Posted by: Methinks | Jun 8, 2007 12:38:26 PM
James,
Well, I could see your point had the Great Leap Forward ever actually created a dime (Yuan) of wealth to share, but as it, and all successive communistic efforts, were all total disasters. Such so that the leaders of China would assumably reduce the incomes of the workers as they had no way to increase them.
Your current economic reality in China today, particularly in large industrial cities, is such that there is actually some wealth to share, hence the possibility of rising wages for those workers who are participating. This is the stark difference between the bad ole' days and the improving days of current times.
I am not tied to this theory, it was just a proposition that rising wages in China is not necessarily an indication of anything, except rising wages, at this time. The track record of what is happening in China is relatively short. I am not ready to believe that China has embraced free market capitalism just yet.
Look at how many of our home grown intellectuals of the left wing still refuse to embrace free market capitalism. Why would we expect the ChiComs to do so?
Posted by: vidyohs | Jun 8, 2007 3:49:36 PM
Look at how many of our home grown intellectuals of the left wing still refuse to embrace free market capitalism. Why would we expect the ChiComs to do so?
They've passed laws protecting private property. They've premitted foreign investment in productive capacity; which means they are accepting the reality of the profit motive.
Posted by: Sam Grove | Jun 8, 2007 4:09:37 PM
Here's the perfect cartoon for this.
http://catbirdseat.typepad.com/the_catbird_seat/2007/04/the_good_ol_day.html
It's kind of a chicken and egg type scenario. Which came first? Industry/jobs or the union? In this setting, it is easy to see that the union is more of a parasite on the economy, temporarily benefitting the union, while sucking away economic life from other areas.
Posted by: Ray G | Jun 10, 2007 10:00:53 PM
If only we could get rid of unions altogether.
Posted by: Objectivist | Jun 12, 2007 1:01:31 AM
Posted by: laptop battery | Oct 13, 2008 3:52:12 AM
The comments to this entry are closed.
