2019-02-26
Average wages in China’s manufacturing sector havesoared above those in countries such as Brazil andMexico and are fast catching up with Greece andPortugal after a decade of breakneck growth thathas seen Chinese pay packets treble.
Across China’s labour force as a whole, hourlyincomes now exceed those in every major LatinAmerican state apart from Chile, and are at around70 per cent of the level in weaker eurozone countries, according to data from EuromonitorInternational, a research group.
The figures indicate the progress China has made in improving the living standards of its 1.4bnpeople, with some analysts arguing that increases in productivity could push manufacturingwages even further beyond what are traditionally seen as middle-income countries. But thefast-rising wage levels mean China could also start to lose jobs to other developing countrieswilling to undercut it.
The data also highlight the problems facing Latin America, where wages have stagnated andsometimes fallen in real terms, and Greece, where average hourly wages have more thanhalved since 2009, according to Euromonitor.
“It’s remarkable how well China has done compared to everybody else,” said CharlesRobertson, global chief economist at Renaissance Capital, an investment bank focused onemerging markets. “It’s converging with the west when so many other emerging marketshaven’t.”
Average hourly wages in China’s manufacturing sector trebled between 2005 and 2016 to$3.60, according to Euromonitor, while during the same period manufacturing wages fell from$2.90 an hour to $2.70 in Brazil, from $2.20 to $2.10 in Mexico, and from $4.30 to $3.60 inSouth Africa.
Chinese wages also outstripped Argentina, Colombia and Thailand during the same time, as thecountry integrated more closely into the global economy after its 2001 admission into theWorld Trade Organisation.
“We have seen pretty explosive wage growth in China since the period of joining the WTO,” said Alex Wolf, senior emerging markets economist at Standard Life Investments.
Euromonitor compiled its data from information provided by the International LabourOrganisation, Eurostat and national statistics agencies, subsequently converting them to dollarterms and adjusting for inflation. But the data do not take into account differing costs of living.
The rise in Chinese manufacturing income contrasts with the decline in other countries — suchas Argentina and Brazil. Even in India, which has seen rapid economic growth, manufacturingwages have flatlined since 2007 at just $0.70 an hour.
Manufacturing wages in Portugal have plunged from $6.30 an hour to $4.50 last year, bringingwage levels below those in parts of eastern Europe and only leaving them 25 per cent higherthan in China.
Manufacturing workers in China are among the better paid in a country where wagedistribution is becoming increasingly unequal. But income levels are rising across the economyas a whole, with the Chinese average wage for all sectors increasing from $1.50 in 2005 to$3.30 last year. That level is higher than average wages for Brazil, Mexico, Colombia, Thailandand the Philippines.
Oru Mohiuddin, strategy analyst at Euromonitor, noted that Chinese workers’ productivitylevels had risen even faster than their salaries. “You have to put [the wage inflation] incontext,” she said. “Manufacturers will still benefit from being in China.”
The size of China’s domestic market is likely to help the country’s manufacturing workers, despite rising labour costs. “Across a range of sectors China will account for 20 per cent of themarket by 2020, similar to North America and western Europe,” said Ms Mohiuddin.
She added that given such a market share was far ahead of India’s 4.8 per cent and Brazil’s 3.3 per cent, “it makes sense for [manufacturers] to be based in China”.
But Mr Robertson of Renaissance Capital noted that the ageing of China’s population, and theexpected reduction of working age people, could lead to higher wage pressure in comingyears.