Academic journal article Monthly Labor Review

China's Employment and Compensation Costs in Manufacturing through 2008

Academic journal article Monthly Labor Review

China's Employment and Compensation Costs in Manufacturing through 2008

Article excerpt

Despite large increases in recent years, hourly compensation costs in China's manufacturing sector remained only 4 percent of those in the United States in 2008; that year, hourly compensation costs rose to $1.36, as China's manufacturing employment continued to increase despite the beginning of the global economic downturn

In 2006, China became the United States' second-largest trading partner in manufactured goods behind Canada. (1) Only 4 years later, China surpassed Japan as the second-largest economy in the world. (2) Because of China's growing importance to the U.S. and global economies, there has been great demand for statistics about China's manufacturing sector, particularly employment statistics and comparable labor-cost measurements. In 2005, the Bureau of Labor Statistics sponsored a baseline research project to assess the quality of China's data on employment and labor compensation in manufacturing. The resulting report contains estimates of compensation costs in China's manufacturing sector for the base year of 2002. (3)

The data sources and estimation procedures used in that original work have been the basis for updates through 2006 and, in this article, through 2008. (4) Building on the baseline report and subsequent articles, this article documents and analyzes changes in China's manufacturing employment and hourly labor compensation costs on the basis of official data through 2008 and anecdotal reports from China since then.

The recent global economic crisis, which escalated rapidly in the second half of 2008, has contributed to jolting shifts in the manufacturing sector in the United States and China as well as many other developed and developing economies. Even so, China's manufacturing employment continued to grow from a total of 97.91 million at the end of 2007 to 99.01 million at yearend 2008. Though manufacturing workers in China are earning more than ever before, average hourly compensation costs were only $1.36 in 2008. China's hourly compensation costs remain far below those of many of its East Asian neighbors like Japan ($27.80) and Taiwan ($8.68), but are roughly on par with those of others like the Philippines ($1.68). (5)

This article first reviews sources of data on China's manufacturing sector and then presents recent trends in China's employment and labor compensation in manufacturing through 2008. The article updates the previous BLS estimates of hourly earnings and hourly compensation costs in manufacturing and highlights ongoing changes for workers in China's manufacturing sector. Comparisons of China's hourly manufacturing compensation costs with those of other nations around the world, including the United States, India, and a number of East Asian economies, also are included.

Available data sources

China's published statistics on employment and wages in manufacturing do not meet international standards. No source of frequently published, official data provides nationwide employment and labor compensation statistics on Chinese manufacturing. To obtain reliable, annually updated, national employment and earnings numbers, data must be drawn from two sources. Data for formal, urban enterprises are collected and reported by the Ministry of Human Resources and Social Security (formerly called the Ministry of Labor and Social Security), while data for other manufacturing units--that is, town and village enterprise (TVE) data (6)--are compiled and reported by the Ministry of Agriculture. TVEs were originally established in China's Maoist Communist period to give rural peasants and town dwellers jobs outside subsistence agriculture without any need for them to migrate to large cities. The primary purpose was rural industrialization in China, to prevent overurbanization of the population and massive urban slums. Because of this policy, almost two-thirds of China's manufacturing workers are now employed in TVEs, while just over one-third work in urban units. …

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