China�s Demographic Squeeze? Have the Martians Invaded?

The Times ran an article about India�s rise as a manufacturing force. Much of it is informative, but some of it is painful. In the painful category is the claim that global manufacturers are turning to India because of �a serious demographic squeeze facing China.� It then goes on to point out that although China has a larger population than India, because of China�s �one child policy� India will have more young workers in less than a decade.

Okay, let�s step back to reality. China�s supply of manufacturing workers will not be limited by its population anytime soon for the simple reason that close to half of its work force is still in agriculture. So, there is not any imminent shortage of manufacturing workers in China.

Now, there is a separate point. There is some evidence (noted in the article) that wages are rising in China. This is not a �demographic squeeze,� this is the desired result of economic growth. Chinese workers, like New York Times reporters, would like better living standards. The fact that workers might be experiencing rising living standards is good news for China � the opposite of a problem. If workers in India will be willing to work for lower wages in a decade than workers in China, that would be bad news for India, not China.

The other painful part of the article is that it implies that unions and higher wages necessarily mean higher costs. In fact, a unionized workforce could also be a more productive workforce, with more training and less turnover. Getting workers at the lowest possible wage is not always the most cost-effective approach. For example, I don�t think the NYT would be more profitable if its reporters were high school kids getting the minimum wage.

--Dean Baker

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