Are increasing Chinese wages good for the US?
Wages are increasing a lot faster in China than in the US. Some are saying that's a good thing, because it will keep jobs in the US, but the problem is that productivity is going up a lot faster in China as well.
Perennial optimist Mark Perry tries to spin the news that wages are increasing a lot faster in China than in the U.S. as something positive for the U.S. because this will lead to more manufacturing staying in the U.S.Skip to next paragraph
Stefan is an economist currently working in Sweden.
Subscribe Today to the Monitor
He is right in the sense that all else being equal lower relative wages in the U.S. will increase the willingness of companies to invest in the U.S. rather than China. However, though lower wages is a potential mean by which to increase employment, it is negative as a self-end. That is especially true to the extent it reflects lower relative productivity, because to the extent to which productivity is also lower it will not increase employment.
This can be illustrated by the fact that average hourly earnings is more than twice as high in Germany than in Greece, but as should be obvious especially these days, that doesn't mean that Greece is more competitive than Germany, because German productivity exceeds Greek productivity even more. And though wages are increasing a lot faster in China than in the U.S., so is productivity.
The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. This post originally ran on stefanmikarlsson.blogspot.com.