Friday, July 16, 2010

Factor Price Equalization

. Friday, July 16, 2010

Somewhat apropos of my last post comes this report on the increased bargaining power of (some) Chinese workers:

In recent months, as the country’s export-driven juggernaut has been revived and many migrants have found jobs closer to home, the balance of power in places like Zhongshan has shifted, forcing employers to compete for new workers — and to prevent seasoned ones from defecting to sweeter prospects.

The shortage has emboldened workers and inspired a spate of strikes in and around Zhongshan that paralyzed Honda’s Chinese operations last month. The unrest then spread to the northern city of Tianjin, where strikers briefly paralyzed production at a Toyota car plant and a Japanese-owned electronics factory.

Although the walkouts were quelled with higher salaries, factory owners and labor experts said that the strikes have driven home a looming reality that had been predicted by demographers: the supply of workers 16 to 24 years old has peaked and will drop by a third in the next 12 years, thanks to stringent family-planning policies that have sharply reduced China’s population growth. ...

The other new reality, perhaps harder to quantify, is this: young Chinese factory workers, raised in a country with rapidly rising expectations, are less willing to toil for long hours for appallingly low wages like dutiful automatons.

I'm always skeptical of this sort of Tom Friedman-esque formulaic reporting, in which one or two (perhaps isolated) incidents are tied to a lazy statistic or two, and out pops a New Rule. So I certainly don't want to push this too far. But new UNC poli-sci professor Xi Chen has done research on contentious politics (e.g. the labor movement) in China, and his conclusion is that despite the popular imagination of Chinese social and economic organization as originating from top-down planning, quite a lot of it actually comes from a bottom-up process. (I believe a book on the topic is forthcoming soon.) A lot of low-level negotiation between employers and employees is certainly consistent with that thesis.

How pervasive is the shift in market power from employers to employees described in the article above? I can't be sure. But I can be fairly sure that it's more common today than it was fifteen years ago. This trend would be unlikely without trade, and should factor into any calculations about whether we should seek to structure trade policy to benefit American over Chinese workers. Would it change any minds if they knew that securing advantages for American workers means consigning Chinese workers to sweatshop conditions?


Factor Price Equalization




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