The wage gap between US and China
The importance of international trade increased dramatically for the US as well as China. The ratio of the sum of exports and imports to GDP approximately doubled from the early 1970s to the mid 2000s for the US. And there is a striking feature that China was involved in about 7% percent of world trade by the mid-2000s. There is no doubt that the international trade have influenced the wage level around the world.
Do wages equalize between US and China?
It is the most remarkable conclusion of the Heckscher-Olin theory that trade can equalize the price of each factor of production across countries. Nevertheless, the long-term effect didn’t complete in the real world, especially in China. On majoy
…show more content…
Since it is less developed, we are rarely seeing what the labor union take measures today. While before it took more responsibility to deliver the Party’s policy to labors.
In another aspect, all of the companies are aimed at the maximium profit, trying their best to cut costs and reduce wages. The companies are more powerful in the labor market, so the wage is decided mainly by them.
In conclusion, because of the relationship in demand and supply in Chinese market, the labors’ competency, the labor union’s situation and the purpose for the company, Chinese labor has been undervalued. And this is a reason for the generation of Chinese and American wage gap.
D. Technological Progress
Also as we get the conclusion from the case in our book, technological progress plays an important role in increasing the wage gap between Chinese labors and American labors.
The first aspect is that with the development of technology the cost and prices of some skill-intensive products decline, and the quality of these products is improved, demand for the products increases. As demand shifts toward skill-intensive products and their production increases, the demand for skilled labor expands, increasing the relative wage of skilled labor.
The second aspect is the technological progress that has occurred within individual industries appears to be biased in favor of using more skilled labor.
Referring to the two perspectives
industry. This change ties in with the change in coercive labor because in order for this industry to boom,
This has happened in part because many kinds of jobs now require higher skill levels, but other factors were also important.
As the rise of immigration gradually inclined, many more job were available for those of different backgrounds, as well as the growth of factories and manufacturing which flourished many cities in numerous states. With more labor being distributed, the price for necessary goods
“Making it in America”, by Adam Davidson, illustrates how technology and machinery are interchanging humans in the workforce. Machines are taking over factories and leaving more employees out of work. Davidson also points out that the wage-gap is considerably increasing between un-educated and educated laborers. Corporations and companies all over the world, including the Americans, Europeans, and Chinese, are purchasing machines over hiring workers to save money.
American’s now quite overwhelmingly agree that this is not the case. Another secondary argument is that the way the United States has dealt with the Chinese in terms of trade has presented many challenges to American employment. Where the United States once dominated manufacturing, China now leads the world by creating goods for extremely low costs, harnessing innovation in manufacturing technology and orchestrating the theft of intellectual properties. Bonvillian makes a point to mention that innovation in Chinese manufacturing is typically understated in discussions, as most are only concerned with the underpayment of the Chinese workforce. A counterpoint to the belief that a nation has to underpay its workers to succeed in manufacturing is the example of Germany. A large number of German citizens work in manufacturing for high wages, creating more expensive goods. The German’s run a trade surplus with China because of their trade strategies. Another great secondary claim is that the United
Offshore countries such as China and India have very little organized labor present, so the private sector is taking advantage of this by moving their business in order to take advantage of the low cost of labour.
Labor relations in China have become more and more complex, labor conflicts have occurred frequently, and thus labor disputes have been growing with a rate much faster than that of the development of GDP in the past decade. They could become a potential obstacle to the economic development if not appropriately managed. The paper studies the condition of labor relations, and probes the profound reasons for it, and compares it across the world in order to give a description for it.
Labor is one of the largest and in certain sectors the most expensive component in the production of goods. Outsourcing acknowledges the labor cost to produce a particular product is cheaper if the manufacturer were to produce the same product in-house where the cost per unit is significantly higher. Stable labor costs are important for long-term revenue projections to be relied upon by managers because they are a precursor of where a company is trending financially. It is this efficiency-in-scale that confirms the benefit of the division of labor memorialized by Adam Smith. As a result of the wage disparity between the costs of American workers versus Chinese workers, hundreds of U.S. based firms relocated all or part of their operations to China, taking advantage of the inexpensive labor market and the many cost-saving incentives offered by the Chinese government.
There are some factors to be considered before making a significant change for the company. The first factor is the ability to pay the employees. The company has to look at the labor-market competition. The organization has to decide the pay level for its employees and whether that labor costs can be covered by the profit earned. Plus, if the organization cannot pay the employees at the competitive rate, the employees will more likely to leave the company for a better job offers. The second factor is product-market competition. If the organization decides to increase the wages of its employees, the company has to charge a higher price for its products or services to make sure that it will get a return on investment. However, if the company increases the price its charge to the customers more than they are willing to buy, there is a risk the company will lose some of its customers. The third factor to be considered is workers’ capabilities to do their jobs. If the workers have a lack of skills to do the job, then it is not worth it to invest a lot on them and vice versa. Thus, the company should consider some factors such as labor-market competition, product-market competition, and worker’s capability before it makes the adjustment in the worker’s wage and
For instance, China has a large labor force with much lower cost of living for the employees compared to the US. China’s workforce is about 98 million employees while the U.S. has only about 17 million workers in the manufacturing field. But the average hourly compensation cost of
In addition, during economic development, the structure of the labor force changed. For instance, preference for white collar jobs was prominent among a labor force that had previously been mostly blue collar. The economy of America as a nation became more industry and service oriented. In addition, the manpower needs and requirements were transformed.
Once the factory became common, technological advances were soon made to improve them, the most important of which was the division of labor.
Literacy Rate is low: Less people are educated thus we found less skilled labors. But at present stage both skilled and unskilled labor are necessary for using good technology and production.
First, their shadow price on wage gap exists in the global comparison. The wages of the Chinese factory workers are much lower than the workers in other countries, which is reflected by the prevailing reputation of “cheap labour” in a global market. An investigation from the U.S. Bureau of Labour Statistics found that the manufacturing labour cost per hour in China is 64 cents, while the average global level reaches $14.22 (Banister, 2005). At the same time, China’s labour cost is not only lower than the developed countries, but also lower than other developing countries. Malaysia and the Philippines is 3 times of the labour costs in China, and the Thailand is 2 times (Rao, no date). As wages occupy a great part of the labour cost, and female factory workers accounts for the majority of the Chinese cheap labour, these figures has largely referred the female factory workers’ wage gap in the global market. Furthermore, even this level of wage is acquired by
Although developing countries and United States differentiate each other by dependence of their production on labour, and human and physical capital respectively, the production will shift to the nations with cheap labour, once technology is comprehended better.