Chinese Wages now higher than in Brazil, Argentina and Mexico

Editor’s note: The average hourly wages in China’s manufacturing section have trebled in the past decade, surpassing those in most of the emerging markets in Latin America, while hitting the 70% of the wage level in weaker eurozone countries, according to an international research group. It is predicted that the China’s domestic needs shall account for 20% of the global market by 2020, although manufacturing jobs may be lost to other countries of lower wages.

Average wages in China’s manufacturing sector have soared above those in countries such as Brazil and Mexico and are fast catching up with Greece and Portugal after a decade of breakneck growth that has seen Chinese pay packets treble.

Across China’s labour force as a whole, hourly incomes now exceed those in every major Latin American state apart from Chile, and are at around 70 per cent of the level in weaker eurozone countries, according to data from Euromonitor International, a research group. The figures indicate the progress China has made in improving the living standards of its 1.4 billion people, with some analysts arguing that increases in productivity could push manufacturing wages even further beyond what are traditionally seen as middle-income countries. But the fast-rising wage levels mean China could also start to lose jobs to other developing countries willing to undercut it.

The data also highlight the problems facing Latin America, where wages have stagnated and sometimes fallen in real terms, and Greece, where average hourly wages have more than halved since 2009, according to Euromonitor. “It’s remarkable how well China has done compared to everybody else,” said Charles Robertson, global chief economist at Renaissance Capital, an investment bank focused on emerging markets. “It’s converging with the west when so many other emerging markets haven’t.” Average hourly wages in China’s manufacturing sector trebled between 2005 and 2016 to $3.60, according to Euromonitor, while during the same period manufacturing wages fell from $2.90 an hour to $2.70 in Brazil, from $2.20 to $2.10 in Mexico, and from $4.30 to $3.60 in South Africa. Chinese wages also outstripped Argentina, Colombia and Thailand during the same time, as the country integrated more closely into the global economy after its 2001 admission into the World Trade Organisation (WTO). “We have seen pretty explosive wage growth in China since the period of joining the WTO,” said Alex Wolf, senior emerging markets economist at Standard Life Investments. Euromonitor compiled its data from information provided by the International Labour Organisation, Eurostat and national statistics agencies, subsequently converting them to dollar terms and adjusting for inflation. But the data do not take into account differing costs of living.

The rise in Chinese manufacturing income contrasts with the decline in other countries — such as Argentina and Brazil. Even in India, which has seen rapid economic growth, manufacturing wages have flatlined since 2007 at just $0.70 an hour. Manufacturing wages in Portugal have plunged from $6.30 an hour to $4.50 last year, bringing wage levels below those in parts of eastern Europe and only leaving them 25 per cent higher than in China. Manufacturing workers in China are among the better paid in a country where wage distribution is becoming increasingly unequal. But income levels are rising across the economy as a whole, with the Chinese average wage for all sectors increasing from $1.50 in 2005 to $3.30 last year. That level is higher than average wages for Brazil, Mexico, Colombia, Thailand and the Philippines. Oru Mohiuddin, strategy analyst at Euromonitor, noted that Chinese workers’ productivity levels had risen even faster than their salaries. “You have to put [the wage inflation] in context,” she said. “Manufacturers will still benefit from being in China.” The size of China’s domestic market is likely to help the country’s manufacturing workers, despite rising labour costs. “Across a range of sectors China will account for 20 per cent of the market by 2020, similar to North America and western Europe,” said Ms Mohiuddin.

She added that given such a market share was far ahead of India’s 4.8 per cent and Brazil’s 3.3 per cent, “it makes sense for [manufacturers] to be based in China”. But Mr Robertson of Renaissance Capital noted that the ageing of China’s population, and the expected reduction of working age people, could lead to higher wage pressure in coming years.

Source: Financial Times
Edited by: Red Balloon Solidarity