Predictable Surprise: China has a labour shortage!

For a number of years, the futurists in TomorrowToday.biz have been saying that although there is some short term pain around offshoring to India and China, that the overall trend was not sustainable. Simple supply and demand logic indicated that a threshhold would be reached. A number of factors are driving the fact that globalisation will (quite quickly, in historical terms) make sure that a competitive advantage based on moveable, non-geographic assets (i.e. people, intellectual property, patents, finance, etc) would be wiped out.

For example, massive wage differentials between the USA and the developing world cannot be sustained. This is good news for the developing world, as average wages in Asia, Africa and South America are set to rise, and continue rising for many years. We have previously talked about this in a post in April 2005 entitled, “Why you shouldn’t be worried about India and China“, where we talked about massive rises in Indian engineer’s salaries over the past 5 years, bringing into line with global wage levels. This is bad news for America, who will need to reduce overall wage bills (by retrenching, or reducing salaries – or, at best, capping salaries in a non inflationary environment for the next few years. From a pure economic standpoint, Americans are overpaid for the value they add to the world!).

But here’s an important article from Businessweek of Mar 27, 06: “How Rising Wages Are Changing the Game in China: A labor shortage has pay soaring. That is sure to send ripples around the globe.” (read it here). Yes, its true. There is a labour shortage in China. Sure, they have millions of unskilled, rural labourers – but they don’t need too many more of those. Africa has the same problem. South Africa has about 25% unemployment, yet has a chronic labour shortage! Its because we’re living in a transition moment, when new skills must be learnt. Education is the key. New frameworks are needed.

But no-one should be surprised by this.

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