Wage hikes in China good for U.S.
A Chinese worker at a production line at the factory of Lenovo Electronic Technology Co. in Shanghai. Credit: AP, 2010
The median American worker today earns about the same as 30 years ago, after inflation.
But it's a different story in China, where wages are rising fast. And while that will make a lot of things a bit more expensive in this country -- where so much that we buy says "Made in China" -- ultimately it's good news.
That's because Sino-American trade imbalances are a big problem. China keeps imports cheap partly by keeping its currency artificially low. Thus, America is flooded with Chinese goods and in return China is flooded with dollars, many of which they lend back to us so we can buy even more. Meanwhile, American exports to China are unduly expensive.
But inflationary pressures are building in China. Wages are rising 10 percent to 30 percent a year. Eventually -- the sooner the better -- China will have to stop buying dollars and let its currency rise. A stronger yuan and higher pay will encourage Chinese workers to spend more, providing the global economy with hundreds of millions of new customers. Chinese imports will get pricier here, U.S. exports more attractive there.
Poorer nations will inherit entry-level textile jobs, which is good for them. But rising Chinese wages and a cheaper dollar mean that, higher up the economic food chain, we should start seeing more stuff that says "Made in USA." If that happens, U.S. employment should pick up, and -- who knows? -- wages might even start rising again. Just like in China.
