Letters to the Editor
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Don't, at first, believe everything that you read
The idea that China has anything but a temporary labor shortage is difficult to believe. China continues to have a vast pool of labor in the country side. Labor is not like capital. The flow of labor is not "friction free". Labor needs housing and training. So it is possible that there is a temporary labor shorage in China simply because labor and employers are not in the same location. But in the relatively near term any labor shortage can be filled by movement from the country side into the cities or by moving factories and businesses outside the cities.
The fact remains that China has a population that is almost four times that of the United States. The "Communist" government in China is hostile to any kind of labor organization or movement toward workers rights (like workplace saftety). Although things are slowly changing, China has little in the way of environmental law, at least that is enforced. These factors, coupled with a huge pool of labor that is far from full employment, means that China has a labor "cost advantage" this is not likely to disappear soon. Regardless of what BusinessWeek says.
The cheerleaders for globalization remind me of the Bush administration confronted with the disaster in Iraq. As the evidence piles up that the benefits of globalization are "unequally distributed" (e.g., corporations reap big profits, workers are lucky to have jobs with stagnant wages), globalization boosters constantly try to trot out "facts" that show that globalization is the best thing, in this best of all possible worlds. Done worry about globalization, be happy. A labor shortage is emerging in China. Don't worry, be happy. Globalization is not really hollowing out jobs for both manufacturing and knowledge workers in the United States. Don't worry, be happy, corporate profits are way up. Isn't it grand!
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only city wages are increasing
Wages for city workers...increasing. Wages for office workers in Shanghai, Beijing, Shenzhen, Xiamen, QingDao, Guangzhou, Dalian... increasing, but not very fast. There are a lot more college graduates now a days to choose from. I can always go to the NorthWest of China and get an OK mechanical engineer fresh-graduate for as little as 2000RMB / month (around $300USD). Same with chemists, IT people, etc. I would not want to hire an older engineer from a state-owned company, so their wages can't go up as fast.
Remember, there is still an itinerant population of some 100 million people here...redundant agricultural labor. What causes wages to go up (I believe) is real-estate and cost of living. There is no shortage of unskilled labor in China, and there is a huge pool of high-school graduates and college graduates are to choose from. In short, I don't think anyone is going to break the middle-class barrier by being a secretary or factory worker (or even Line Supervisor) for many years to come.
If anything, there is a shortage of employment infrastructure to protect young workers shipped in from the countryside.
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Labor crunches
If there were less workers than there was work, I might agree with your assessment. It is true that moving manufacturing to Africa would be the best thing that happened to that continent.
However, there is the problem of the amount of work. Let me give my example. I'm now in my 22nd year in the film business and I've weathered more than my fare share of work slowdowns. And I've watched how the industry works. I've seen producers move into a state, offer low wages with the promise of more work in the future. We took the jobs, because they brought the type of work we wanted to do. As the years (usually 3-4) went on and we started commanding more money, producers moved on, and the process started yet again, somewhere else, as those of us left behind scrambled to make it. Many of us fell out.
In the 80's and 90's, they started moving to Canada. Each locale becomes enamored of the money a film production infuses into an economy (it's a very capital intensive business)and creates tax incentives to bring films there. But the labor cycle keeps happening. Canada has been losing a lot of film business and now they're going to Australia and New Zealand and Eastern Europe. (A quick side note: It's a good thing that Peter Jackson is doing for New Zealand, but I'll place bets about how long it will last.)
Now, because of a variety of reasons, this process is happening again in the states, as I've just been experiencing as the state I live in now is getting its place in the sun. The problem is, I'm making less now than when I started.
Admittedly, film is a little different, not requiring the capital investment that manufacturing or agriculture requires. But, since I'm not allowed to get job re-training because "my business isn't effected by globalization," I see a different possibility than you posit.
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cheerleader?
Andy Xie at Morgan Stanly wrote about rising labor costs in China, and his report is insightful.
First, living costs for coastal factory workers have risen greatly. Food, electricity, and water prices have risen sharply in the past three years. Also, the doubling of land prices along the coast during the past few years has increased rents. These items account for a large share of expenditure for a typical factory worker. Wages have to rise substantially (probably 20-30%) just to cover the rising living expenses.
Second, the government has tightened the collection and increased the level of labor benefits. Some businesses claim that these benefits add 40% to labor costs. Many coastal governments have raised minimum wages by more than 20% and tightened enforcement of minimum wages as well as prompt payments.
Migrant workers have supported China’s export machine but have enjoyed few benefits from China’s boom. Their wages were stagnant in the 1990s. Their working conditions are harsh. Factory injuries are frequent and poorly compensated.
In other words, soaring Chinese labor costs are coming about because even the starving peasant youth won't migrate to the coast when 1. they can't make any money 2. they're brutally exploited.
In other words, we're really taking about bare subsistence here. It is not that these Chinese workers, who can now (gasp!) pay for water and food with their 'soaring' wages, are going to become whole hog consumers. No, they merely can scrape by another day.
It's worth noting that what a large part politics is playing here, and NOT the 'free' (unregulated) market. Note the role of political decision and policy of the Chinese govt in raising wages - hardly an argument for free markets.