

China's minimum-wage increase will raise prices around the world - ck2
http://www.globalpost.com/dispatch/news/regions/asia-pacific/china/111109/china-economy-manufacturing-guangdong

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cageface
This is the way globalization is supposed to work, isn't it? Over time the
difference in wages between one country and another for the same work should
diminish.

~~~
ck2
Yup, I don't actually have a problem with this - if only it meant domestic
production would be more viable but that is unlikely. However won't a wage
increase for thay many workers just mean their local inflation will also rise?

I still want to know we can buy 50 cent items from China off ebay and have
them mailed individually for free. How on earth does their postal service (and
our local country's) mail something that cheaply? Cannot quite grasp the
logic.

~~~
jrockway
Domestic production is already viable for many, many consumer products. The
margins are so high that the minimum wage difference doesn't matter.

It's stuff like 99-cents-for-ten-gallons shampoo that is most profitably
produced in China, and that will probably remain the case.

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electromagnetic
It'll just be $1.29-for-ten-gallons shampoo after the wage hike.

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bfe
This isn't really news. Minimum wage in China is set per province, and
different coastal provinces at different times have been posting significant
minimum wage hikes, even competing with each other's wage hikes, for quite a
while now.

But more importantly, the government policy actions haven't been the most
important factor at work; many employers have been raising wages ahead of and
above the minimum wage hikes, and have been actively sending out recruiters
for the first time. Many of them have started having a hard time finding
enough workers for the first time, after spending the past couple decades
seeing long lines form for any job posting. The Chinese labor market has been
tilting toward workers' favor on its own, with workers having a lot more
options. This will keep pressuring wages up in the coastal provinces, keep
redistributing production and domestic spending power to the inland provinces
and other countries in southeast and south Asia, and keep spreading domestic
demand throughout, all of which is overall good for all of them, and good for
the rest of us.

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andrewfelix
If this is going to reduce consumption globally, then this is good news IMO.
One of the best things we can do for the planet is consume and import less
crap.

On a kind of unrelated note, I'm hoping that the digital economy starts to
really placate our need to buy useless physical stuff.

~~~
wladimir
...and that the digital economy and the advances in communication technology
will make it less important where you live, and where you were born.

It is probably naive, but I still have some hope for technology to be an
empowering, equalizing force that will make the world a "flatter" place.

~~~
AndrewDucker
It is flatter. Poorer countries are getting richer, richer countries are
stagnating, we're moving closer to equality.

The only question is whether richer countries will actually collapse down to a
lower level, or if they will just stagnate until the poorer countries catch
up.

(Personally, I hope the latter.)

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skylan_q
As long as we keep printing money, raising taxes and increasing government
budgets, stagnation will remain with us. As long as we're price-fixing money,
taxing, regulating, over-legislating and having overblown government budgets,
we'll never never see enough increase in productivity for the average
person/job to see real, sustained growth.

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ck2
Looks like Cambodia is going to become the new China.

I also see more UPS batteries that are made in Vietnam instead of China.

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yaix
Bangladesh and Pakistan are already huge in clothing. Vietnam is also
atracting many producers of cheap/easy to make products. China is moving to
mote complex products. That's just how it is supposed to work.

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yaix
China's minimum wage reduced prices around the world. For some simple products
like clothes, other places with lower wages like Pakistan, Bangladesh and
Vietnam are already taking over a big part of production. Great. Because
eventually their wages will be too high as well.

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skylan_q
This doesn't cause inflation. It just shifts money from everywhere else to the
poorer people who remain employed on the new minimum wage.

Inflation is caused by increasing the monetary base and having that new money
circulate through the economy. Both the US Fed and the Chinese central bank
have been doing this.

~~~
muraiki
When money printing can be translated into wages (such as raising the minimum
wage), then this sets the stage for consumer price inflation. When the CPI
goes up, people demand higher wages, etc.

This is why in the US we probably* don't need to fear hyperinflation: we're
not seeing a translation of Fed printing to wages.

*When the Weimar Republic hyperinflated, it was made possible by the fact that large numbers of people were employed by the state, whose wages increased with inflation. I've heard some statistics that place a substantial portion of the US population on government inflation-index income (be it something like social security or something more indirect like Medicare). As to whether it's to a great enough extent to create a Weimar type situation, I don't know.

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tomlin
Capitalism only works if someone is the toilet. China refuses to be the
toilet. Other countries with large populations are also becoming
industrialised, as such, will refuse to be used as our toilet.

Sarcastically speaking, this couldn't come at a better time.

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blahedo
> _“I think there’s quite a good argument now that the global race to the
> bottom has been concluded,” said Geoffrey Crothall of the China Labour
> Bulletin, a Hong Kong-based labor-rights group. “There’s nowhere else to
> go.”_

Africa?

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oceanician
I wonder what % of employees in China are actually earning minimum wages?

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nekojima
Around 80% earn at or below the minimum wage currently.

Most state figures, which indicate a higher rate above the minimum wage, are
either made up and/or only include urban working residents, usually those in
state owned/controlled enterprises or large "privately" owned enterprises.

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known
Capitalism in NOT zero-sum. Globalization is zero-sum.

~~~
yxhuvud
No, it is not - as proved by Krugman when he was an economist and not a (poor)
politician.

~~~
gclaramunt
Wasn't David Ricardo with his "Comparative Advantages" theory ?

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yxhuvud
Yes, a very large part of it comes from Ricardo. However, theory before
Krugman was mostly limited to belief that the main gain from globalization was
from trade between countries with capital and those with cheap labour.

Krugman took it one step (actually there was even more people in between
pushing the theory forward, as Hecksher and Ohlin) further and his point was
that economies of scale will make it beneficial also for economies of similar
development level to trade with each other.

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solokumba
Good. Maybe we can start making things in our country now.

~~~
electromagnetic
I honestly think most companies keep production out of North America simply
because factory workers have a tendency to go Union, and factory workers will
always get the backing of other unionised factory workers.

This is like the Walmart Union situation in which the workers don't realise
that Walmart makes money because these people are willing to work at minimum
wage so walmart can undercut local competition. If walmart starts paying
above-market-rate for wages, then it can no longer undercut local competition,
meaning a lot of stores will close because they don't have a high enough
profit margin, meaning mass lay offs.

IMO unionising isn't worth it if I have a 1 in 5 chance of getting laid off,
especially if it means I won't have luck at finding another job.

~~~
Rastafarian
I honestly think you're simply an awful person.

No, people in 21st century US should not live in misery and fear of losing
their job.

Walmart obviously has many other advantages over smaller competition other
than the wages. It won't close because of say 20% wages increase.

If a Walmart store closes, local people obviously will continue to buy food.
I.e. there will be many new stores open, ex-Walmart employees will be in a
good position to take advantage of that, as they know the local customers.

IMO unionizing is the only sensible strategy for any employee, that is easy to
replace. Especially for employees of not so ethical corporations like Walmart
and Zynda.

~~~
learc83
I don't think anyone is really talking about 20% wage increases. Unionize
Walmart/living wage types are usualy talking somewhere around $15 per hour
which would be closer to 100% wage increase. Even if we're talking about
moving workers from 8 to 12 thats a 50% increase.

Some back of the envelope math shows that if Walmart gave an across the board
50% raise to every employee it would consume it's entire operating profit.

If they were forced to pay $15 per hour I think they would make a few changes.

1\. They would accelerate the deployment of rfid inventory control, vastly
reducing the number of stockers, and completely eliminating cashiers--all
those employees would now be unemployed.

2\. They would squeeze their suppliers even more, and the suppliers would be
forced to cut their employees salaries.

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hotdox
Is there some numbers about wage part in product price?

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cq
Minimum wage laws are literally the most moral laws that exist in this world.

~~~
pavel_lishin
Why?

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esrauch
Because slavery is the most immoral thing in the world. Dead people don't care
that they are dead, slaves care that they are slaves.

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shareme
Unfortunately no in the long term as factories prepared for this by moving
towards automation. The small time jobbers yes obviously..

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jasonkester
_“I think there’s quite a good argument now that the global race to the bottom
has been concluded,” said Geoffrey Crothall of the China Labour Bulletin, a
Hong Kong-based labor-rights group. “There’s nowhere else to go.”_

I don't know about this. My globe shows an entire continent yet untouched,
complete with good ports and hundreds of millions of potential cheap laborers
who I imagine would be more than happy to find a Walmart factory in their
neighborhood.

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thefool
If you are referring to Africa, there's a good reason multinational
corporations aren't opening up shop.

Namely, the multinational corporations of the 1880's and on made such a mess
of things that many of the countries now have very little infrastructure and
spigot economies where multiple parties jockey for control of the natural
resource(s) and hence power in the country.

Barring some sort of radical change, this situation isn't changing any time
soon for most places.

The irony is (excepting south Africa and Egypt which have their own
histories), the only stable countries where companies might be able to set up
shop are the ones with no natural resources, because there's not much to fight
over.

~~~
jfruh
True enough at the moment but you'd be surprised how quickly (using "quickly"
on a historical scale, we're still talking years or decades) that can change
when economic forces start pushing.

If you had told most Americans just 30 years ago that China would be a land of
millionaires and gleaming cities and high-skill factories, they'd be
flabbergasted, not least because the country was run by an incompetent
Communist dictatorship that had starved millions of its own people for no good
reason.

