Question: True or false? Workers’ pay is rising in China
Answer: It depends on which workers.
For blue collar manufacturing workers in China’s export industries, the answer is True.
 Foxconn, the subsidiary of Taiwan’s Hon Hai Precision that assembles Apple’s iPod, iPhone, and iPad (as well as products for Hewlett-Packard, Dell, and Sony), will raise pay for its workers by 30% after a series of worker suicides.
Honda has offered raises of 24% to settle a strike at its Foshan transmission plant.
The government in Shenzhen, a key manufacturing center, will raise the minimum wage there by 10% to 20% on July 1.
Wages have roughly doubled over the last five years for blue-collar workers in the export factories in the region around Hong Kong.
But for college graduates, the answer is False.
China is suffering a glut of college-educated workers that has led to a decline in pay. One Chinese company told the New York Times that a recent graduate with a degree in computer science would have commanded pay of $585 a month ten years ago but is paid just $512 a month now.
And that’s assuming the college graduate gets a job offer at all. 20% of graduates with a B.A or B.S. would be willing to work for free in their first job because it is so hard to find work, according to a recent survey by the Communist Youth League Beijing Committee.
While big cities have growing numbers of unemployed college graduates—often single children whose families have spent all their savings on a university education—the coastal manufacturing regions can’t find enough workers.
As a very short-term fix, the Chinese government has been requiring state-controlled companies to hire large numbers of the college-educated unemployed and encouraging manufacturing companies to move inland to areas where it’s easy to find workers.
In the long-term you can bet that the planners in Beijing will be looking to encourage the growth of industries that will absorb this college educated workforce.
Just another reason that China will aggressively climb the value-add ladder in industries from autos to telecommunications equipment.
Yclept,
I wrote a response to your post on real estate, in the comments to Jim’s “US Markets Up…” column on June 2. It’s a long response so I won’t post it here, but if you’re interested, I suggest you read it. I think it provides a helpful distinction between arbitrage and inflation. More importantly, it helps illustrate the difference between “value” and “cost”.
This is great news, Jim, and I read it in the same way. China will be developing more advanced industries and increasing domestic consumption in the near future.
Good comment Jim, we wonder why unemployment is so high in America!! and were outsourcing jobs. We lowered our scholastic requirements to meet the demands of no child is left behind!! Well this country is being left behind!!
I read someplace that wallmart was asked by some China suppliers for a pay raise, and Wallmart said no.
If wallmart the worlds biggest retailer will not pay more, and the cost of production is China is going up, and … they are building more factories inland,, and college grads can’t get jobs…
Isn’t there a bad smelling rat in there some where.. ?
I think this is another area where the concept of supply and demand runs amok. Nothing is self-correcting in China. It’s another example of government driven policy for the economy that has no anchor in reality. College graduates–“educate and you succeed” – is like the mantra “to be rich is glorious”. Over production of graduates in China is no different than over production of manufacturing facilities, industrial parks, roads, airports, infrastructure… there is a shortage of absolutely nothing – except the efficient investment of capital. The Chinese graduates unable to advantage themselves are victims of a flawed concept of economics, the success or failure of which underpins world economic health.
Hi Jim: Any chance you can post returns for your Jubak’s Picks Portfolio for the first quarter of this year – it being already June??
Thanks!
“Foxconn, which makes the iPhone and other famous electronic items, announced an immediate 30 percent pay hike on Wednesday” Ten or twelve suicides at the factories may have had some bearing on this.
Also, With the shape the rest of the world is in, might it finally make sense to China for it to get domestic demand building?
And the traditional sector to soak up over-educated, otherwise unemployable college grads is…finance. Yet another reason why banks need to expand in China (even though expansion is at the retail banking end of things).