What’s the most important price in the world?

Not oil, and not the U.S. prime rate. It’s not the price of tea in China (but you’re getting warmer).

From The Economist:

A seemingly unlimited supply of cheap workers has been one of the main forces behind China’s rapid economic growth. But over the past couple of years, factory owners have complained of labour shortages and wages have risen more rapidly, leading some to conclude that China’s “surplus” labour has been used up.

The country’s one-child policy, introduced in 1979, has caused the growth in its labour supply to slow sharply… After rising by 1.3% a year during the decade to 2005, the population of working age is expected to increase at an annual rate of 0.7% until 2015, and then shrink by 0.1% a year until 2025. At the same time, the shift of workers from agriculture to industry, which has been an important source of productivity gains, will also slow.

A rise in Chinese wages equals a vast reduction in global poverty. But more than that, expensive Chinese labor is practically a precondition for a manufacturing sector in the rest of the developing world, especially Africa.

England howled when the textile sector fled the UK for cheap continental labor, and France bawled when firms fled to those low-cost upstarts, the Americans. Americans cringed to see the work flow to East Asia and then Mexico, and the Mexicans are simply apoplectic that firms are leaving that increasingly high wage locale for cheap China.

Prepare for a primal trade scream from the Orient.

2 thoughts on “What’s the most important price in the world?

  1. I am eagerly waiting for the day when China will be outsourcing to Africa, when call centres in Egypt will answer customer service telephone calls and use Indian first names (“Good morning, this is Ankur…”)
    That should be fun.