The End of Cheap Chinese Labor

35 Pages Posted: 3 Oct 2013

See all articles by Li Hongbin

Li Hongbin

Tsinghua University

Li Lei

Tsinghua University - School of Economics & Management

Binzhen Wu

Tsinghua University - School of Economics & Management

Yanyan Xiong

Southeast University - School of Economics and Management

Date Written: May 6, 2013

Abstract

In recent decades, cheap labor has played a central role in the Chinese growth model. However, wages are now rising in China, being significantly higher than those earned by workers in India and Indonesia in 2010. China’s wages also increased faster than productivity since the late 1990s, suggesting that Chinese labor is becoming more expensive in this sense as well. The increase in China’s wages is not confined to any sector. The main forces that are pushing wages up include the reforms in the late 1990s that re-established a flexible labor market in China, the decrease of the growth of China’s labor force; and the slow-down of China’s rural-to-urban migration.

Keywords: Cheap labor, Wage growth, Relative cost of labor, China

Suggested Citation

Hongbin, Li and Lei, Li and Wu, Binzhen and Xiong, Yanyan, The End of Cheap Chinese Labor (May 6, 2013). Available at SSRN: https://ssrn.com/abstract=2261139 or http://dx.doi.org/10.2139/ssrn.2261139

Li Hongbin

Tsinghua University ( email )

Beijing, 100084
China

Li Lei

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

Binzhen Wu

Tsinghua University - School of Economics & Management ( email )

School of Economics and Management
Tsinghua University
Beijing, Beijing 100084
China

Yanyan Xiong (Contact Author)

Southeast University - School of Economics and Management ( email )

Sipailou 2#
Nanjing, Jiangsu Province 210096
China

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