Sunday, May 30, 2010

Worker Strikes (and Shortages) in China

As reported in this Automotive News article, Honda is experiencing a worker strike in China.  The workers are demanding a wage increase from about $215/month to about $300/month.  (Yes, those are per MONTH wages!)  Although even the potentially increased wage is significantly less than an equivalent wage in the United States, the percentage increase is quite astounding ... about 40%.

I've been reading for months about firms in China having problems hiring enough laborers to work in their manufacturing facilities.  As economics will tell you, the way to hire workers when they are in short supply is to increase wages.  These increases, if significant (and I'd say 40% is significant) will lead to inflation.  This of course means that the cost of manufacturing in China will increase, making their exports less competitive over time.

My opinion is that issues like this in addition to potential social issues (the Chinese government continues to suppress any thoughts of disagreement) and the eventual costs China will face cleaning up the environment they are destroying will eventually catch up with China.  I think this will mean a bust at some point for their economy, I just hope it doesn't serve to bring down the world economy with it!

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