Working Conditions in China: Supply and Demand

The NYTimes has a lengthy and self-congratulatory article on improved working conditions in Chinese factories which it suggests are due to negative publicity from earlier NYTimes articles. Indeed, as soon as the NYTimes starts to investigate, we are presented with this boardroom set piece:

“The world is watching!” [Foxconn Chairman] Mr. Gou yelled, according to multiple people. “We are going to fix this, right here!”

The Times articles, part of a larger series, are well written and informative and no doubt they have prodded some changes at certain companies. China, however, is a very big place and the real story of better working conditions is a story of supply and demand.

Wages in Chinese factories have been low because wages in China’s agricultural interior were even lower and the great migration from the country to the city, one of the largest migrations in human history, meant that there was a ready supply of workers desperate for work and the more work the better. Even today many workers want longer hours:

In March, when Foxconn announced that workers’ hours would be reduced to China’s legal limits, employees began complaining. “Absolutely I’d like to do overtime to work more than 60 hours, but now there’s a ceiling on it,” said Ma Changqiao, a 23-year-old at Foxconn’s Chongqing factory.

As the great migration leveled off, however, wages began to rise. At first, workers wanted all of the increase in wages in money but as the more basic needs of workers and their families have been met the demand for better working conditions and more leisure has increased and this has made it profitable for firms to supply better working conditions.

Thus, the real story of better working conditions is not a spate of negative publicity, a mere blip in the face of much larger forces, but rising wages with a touch of Maslow’s hierarchy.

To its credit, the NYTimes article provides evidence for the larger story although you have to dig past the self-congratulatory material. The article notes, for example, that working conditions are also improving rapidly in little known companies not subject to NYTimes oversight:

The factory, in Chongqing, makes computers for Hewlett-Packard, a company with little of Apple’s glamour. It is operated by Quanta, a little-known Taiwanese manufacturer.

Inside the plant, amid thousands of workers in bright white uniforms, are occasional flashes of pink worn by people like Zhang Xuemei, a bubbly 19-year-old with glinting earrings whose sole job is to chat with co-workers.

For eight hours a day, Ms. Zhang collects complaints about the factory’s free meals and dorms. She listens to workers who are divorcing, homesick or arguing with managers. When she finds someone suffering, she refers them to the company’s full-time doctor or professional counselors.

Quanta’s 10-story dormitories feel like a college campus. There is a free movie theater, television rooms, a large martial arts gym, two spacious karaoke bars, a huge cafeteria and an aerobics hall playing a Chinese remix of “Gangnam Style.”

and here is the key

And the amenities are partly selfish: one of the biggest problems for Chinese factories is that workers are constantly leaving. Hewlett-Packard hopes that by improving living conditions, turnover and training costs will fall.

Addendum: Tim Worstall points out that “Manufacturing wages have been improving at 14% a year (yes, after inflation) since 2000. That’s a decade before anyone started to agitate about the working conditions at these factories. Or at least it’s a decade before anyone took any notice of such agitation.”


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