Will Higher Wages in China Cause Chinese Factories to Cut Product Safety to Compensate?

There seems to be a power play going on in China by the Centralized Government, and it appears that the ruling power is less than happy with the foreign factories churning out products using the cheap labor supply rather than Chinese home-grown companies owning the factories and reaping the rewards of the profits from the cheap labor. Why would I assume this?

Well, if you are a worker in a factory in China, you are not allowed to strike, it’s against the rules, but for some reason it’s okay if you strike in a foreign owned factory in China. When there are problems in Chinese owned factories, it is not publicized but if it happens in a foreign factory it is placed in the World Media and trumpeted.

This is a carefully orchestrated set of events, but it may backfire, because once the labor starts this movement it will hit “ALL” factories, Chinese Owned as well, and China will have the equivalent of an Industrial Revolution revolt and unionized labor. It will also hurt China’s advantage of cheap labor, and new factories may migrate to India, Egypt, Africa, Indonesia, and elsewhere where people will work for $1 a day or less, as Chinese labor will not work for less than $3 per day in the future, or more.

Remember China claims a middle class of 470 million, and they believe this to be about $1200 per year in US Dollar terms. No not much but with a purposely lowered currency, and low price points it is survivable, middle class, yes, questionable, but this will soon change it appears.

An interesting story in the USA Today on June 17, 2010 titled; “U.S. Prices Could Rise with Chinese Workers’ Wages” by Kathy Chu – where the title tells it all. And yes, the rise in pay for the working Chinese will indeed raise prices of goods made in China, but it may also do something else. We already know that when it comes to Chinese Goods exported to the US, quality is a huge concern, so too is safety.

Remember, toxic dry wall, lead based paint in toys, poisonous dog food, poisonous toothpaste, and protein feed used in fish products. Also realize that today, many Pharmaceutical Companies are now manufacturing in Chinese plants. Will the increased costs in labor, cause factories to cut costs elsewhere? And, if so, what does this mean for American Consumers, realizing of course, that China is now our factory floor. Think on this.

Ref.

1. Wall Street Journal; “Workers Challenge Beijing’s Authority – Unrest at Honda Parts Plants in Southern China Poses Dilemma for Communist Party – Labor Rights or Central Control,” by Norihiko shirouzu, June 12, 2010.
2. New York Times (in Business Day section); “In China, an Unlikely Labor Leader Just Wanted to Live a Middle Class Life,” June 14, 2010.
3. “The Bull in China,” (fourth edition) by Jim Rogers, Random House, New York, NY, 2010, ISBN: 978-1-4000-6616-2.

Source by Lance Winslow