China is undergoing a labor shortage due to its one child policy with its forced abortions, which means that labor costs are climbing. It may soon reach a point when American companies will do better to keep their manufacturing jobs here. From Harold Meyerson:
The best news about the American economy isn’t coming from America. It’s coming from China.
The inexhaustible labor pool that has fueled China’s rise as the world’s dominant low-cost manufacturer is beginning to get exhausted. The nation’s decades-old one-child policy has collided with its decades-old industrial development policy to produce something hitherto unimaginable: a labor shortage. China’s labor force will begin to shrink in the next year or two, the Wall Street Journal reported on Monday.
The result, as the Journal documents, is steeply rising wages — during the past year, up 14 percent in Shanghai; 18 percent in Guandong (China’s industrial belt); and 28 percent in the inland province of Chongqing, a lower-wage region to which manufacturing has only begun to relocate.
The implications for the U.S. economy are potentially major. With labor costs soaring in China and the yuan slowly rising, while in the United States productivity soars and the dollar slowly declines, the economic advantages that American companies reap by offshoring production begin to dwindle. A Boston Consulting Group study released this month on the return of U.S. manufacturing concludes that “re-investment in the U.S. will accelerate” as a result of these trends.
OK, it’s not quite so simple, as the column goes on to explain. But still. Maybe China and other countries will start outsourcing their manufacturing to us. If China is becoming the new America economically, maybe America will become the new China. Not that this would be altogether a good thing.