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The labor market in post-reform China: history, evidence, and implications; China’s labor cost advantages are shifting but will remain formidable

Concern over China’s growing economic power has focused attention on its prevailing wage, which–in spite of recent strong growth–remains a fraction of that of the industrialized countries. This paper analyzes the recent history and current structure of China’s emerging labor market with the use of published econometric evidence of Chinese wage determination and with recent labor market, macroeconomic, and demographic data. The results indicate that wages of skilled Chinese workers will accelerate enough for the skilled wage gap with the industrialized world to narrow appreciably over the coming years. China’s advantage in semi-skilled and unskilled labor costs, however, will continue for an indefinite period. 

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