Lessons from the U.S. and Germany
The issue of low wages in China has become a recurring problem in the Chinese national economy. As China is now widely acknowledged as the “workshop” of the world, its low wages, no doubt, have been an attraction for manufacturing. Nevertheless, the same low wages have also become a major bottleneck for further economic growth and social development. First, the necessity of increasing domestic consumption was addressed in the 2008/9 global recession. Clearly, the over-dependency of China on foreign demand in the past is no longer able to sustain its overproduction of industrial goods in the long run. Besides, the generally low skill levels of the industrial workforce have led to a vicious “low-wage/ low-skill/ low-value-added” trap. “Made-in-China” mainly means labor-intensive, low-end and low-tech products, or in many cases, high- tech products but with core design and technologies controlled outside China and a strictly limited input from Chinese workforce. At the same time, the high turnover rates and frequent labor disputes (e.g. in the electronics industry) reflect the lack of employees' loyalty and their unwillingness to cooperate. As an innovation and upgrading strategy may necessarily reduce the demand on unskilled labor or require skill development, only a trustful labor relations can make the strategy successful primarily by soothing workers’ insecurity of employment and relevant concerns. Consequently, the unstable situations in Chinese industries make any innovation or industrial upgrading extremely difficult. Further, low wages have become the top cause for several major waves of labor unrest. For instance, the recent slew...
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