Skilled Labor Cost Gap With China Will Narrow

By John S. McClenahen During the next decade, U.S. industries with a high concentration of skilled workers could find their labor cost gap with China narrowing. But China will maintain its cost advantage for semi-skilled and low-skilled labor, says Cliff Waldman, an economist at the Manufacturers Alliance/MAPI, an Arlington, Va.-based business and public policy group. He says that the increasing importance of education in the Chinese labor market, the building-up of the country's technological infrastructure, and strong productivity growth suggest that skilled Chinese workers' wages will grow at an increasingly faster rate during the decade. "A narrowing of the U.S.-China labor cost gap in industries that employ a relatively high degree of skilled labor will lessen the degree of import competition in those industries and, in a development that will be favorable to the [U.S.] domestic manufacturing job base, it also will diminish the degree of production outsourcing to China from these industries," Waldman states. China, however, will maintain its sizable advantage in semi-skilled and low-skilled labor costs as government-owned enterprises in China continue to shed workers and cities continue to have problems absorbing workers from rural areas. A surplus supply of lower-skilled labor will last for at least a generation, Waldman predicts.

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