As motorcycle manufacturers everywhere are struggling to remain competitive, they’re facing cheap Chinese producers making impossible demands on their few remaining profits, leading to outsourced production in China in order to compete, however, a news item this week signals a change may be brewing.
Foxconn Technology, a Chinese contract electronics manufacturer making items like the Apple iPhone plus products for Dell and HP, has been forced to raise wages by 100 percent, doubling the incredibly low pay of their workforce. Last week, Honda agreed to raise wages at one of its Chinese plants by about 30 percent to resolve a strike but this week is facing another strike at a different plant.
The industrial actions at Honda’s China suppliers, both in the southern city of Foshan, come against a backdrop of rising labor costs and growing worker agitation at other employers around the Pearl River Delta, one of China’s main manufacturing hubs.
While pay is still low by the standards of many other countries, any time you double your cost of labor, things are bound to change as you pass those costs on to your customers.
Analysts say the changes result from the growing clout of workers in China’s economy, and are also a response to the soaring food and housing prices that have eroded the spending power of workers from rural provinces. These workers, without factoring in the recent wage increases by some employers, typically earn $200 a month, working six or seven days a week.
Many have been saying the Chinese manufacturing miracle over the past decade or so was some sort of new type of market economy or state capitalism that all other countries should emulate. It’s beginning to seem like the “miracle” of low cost Chinese manufacturing may be based on little more than extremely low pay. In the interconnected world of today, even workers in China can see where they stand and it doesn’t appear they’re willing to remain in place at the bottom of the ladder for much longer. The inevitable shift of all manufacturing to China may not be quite so inevitable after all. Wouldn’t it be nice if more companies focused on keeping their current factories and work forces in place instead of setting up shop in some other country where the major (only?) attraction is extremely low labor costs, especially when those costs may now be rising?
I look at this as a very positive development. Though many factors are involved in the cost of goods manufactured in China, labor certainly plays a part. If the huge advantage of artificially low wages begins to dissipate, they may have to compete in other areas like innovation and product quality, areas where countries around the world are more than happy to take them on. In a competition like that, everyone benefits.