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Am I naive to think that as the Eastern giants (India, China etc) raise their standards of living as their economies grow, that wages for those in their factories making every garment and geegaw trinket, that we currently consume in the West, will rise?


Therefore the price of those items will rise, putting them beyond the reach of many British consumers?


Eventually we'll have to stop finding cheaper and cheaper labour around the world, no?


Or are we to assume the whole process becomes more and more automated to remain cheap? But what then for the thousands of factory workers currently making this stuff? Will they all go on to become project managers and consultants?

Average wages in China have risen around 15% a year for the last 3 years, but of course the price of tellies hasn't gone up by 50% over the same period.


Prices have been largely stablised because rising salaries have been balanced with greater efficiency. This process is likely to continue, Chinese manufacturing is terribly inefficient.


Almost half the Chinese economy is already services, and this is expected to rise significantly - so the creation of project managers and consultants (and programmers and entertainers) in China poses no greater medium term challenges than they do in the UK.

david_carnell Wrote:

-------------------------------------------------------

> Am I naive to think that as the Eastern giants

> (India, China etc) raise their standards of living

> as their economies grow, that wages for those in

> their factories making every garment and geegaw

> trinket, that we currently consume in the West,

> will rise?


Not necessarily. For a start, at least some manufacturing sectors have shifted away from China to places like Vietnam and Indonesia where labour is even cheaper* (in 2010, Vietnam wages were about a third of rates in China, though strikes and inflation may have changed that slightly). Which might explain the rapid fall in prices of everything if there'd been one.


Secondly, average wages don't necessarily mean very much. For example, the ?4bn paid out in bank bonuses last year is equivalent to ?500 for every one of the 8 million Londoners. That adds 2% to the average wage. That's great news on paper - it's an extra week's pay for everyone. But I doubt many will have felt the benefit.


The perception that, rural poor aside, China's economic growth must be creating a prosperous middle class is a nice one, and coincides nicely with (Western) European versions of economic history. But that doesn't mean it's true, and there's some suspicion that the Chinese middle class is 'missing', and only a tiny minority of the very rich are benefitting much at all. This might not be true, but there are subtle signs that white-collar work doesn't necessarily imply a disposable income, and it's the last bit that matters.



*Huguenot's point about efficiency is also true, and that will also be keeping prices down. But the same efficiencies are also helping bring manufacturing back to the US (and, possibly, Europe), so it may be a zero-sum game.

US energy prices are dropping significantly because of shale gas in particular and they don,t have a minimum wage or much of a welfare state to give people an alternative so manufacturing is 'easier' to get back to the US(plus it's got itself as a massive market right there>)

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