Labor costs in China are rising. Workers are demanding higher pay, and are getting it. One would think that manufacturers would be scrambling to find poorer countries with cheaper labor available, but this is not the case. Although in the long term, China will have to find alternatives to cheap labor to keep manufacturers from leaving, in the short term, China has many other factors that are keeping manufacturers in place. Despite the higher labor costs, China has very advanced supply chains, and can add thousands of workers to a production line for a particular product should demand warrant within a matter of hours. In the long term, to combat the economic ramifications of rising labor costs, China will need more innovation. Currently, most of the profits for goods made in China go overseas to companies such as California based Apple. The Chinese government is spending huge amounts of money on research to try to spark the kind of innovation that is found in many western countries that will be able to take the place of manufacturing in the economy when manufacturers do eventually start moving. These efforts have proved mostly futile so far. To achieve greater innovation, China’s government must give greater freedom to innovators rather than try to pick hand pick what the next big innovation will be.
No comments:
Post a Comment