Many companies like to expand their business to China due to cheap labor. According to CNN, the highest minimum wage in China, in Shenzhen province, workers get $240.49 a month. The minimum wage in Beijing is $2.24 dollars per hour, which is much lower than that of the US’. Although China’s government announced that it will raise the minimum wage up to 40% of the average salary by 2014, it is still relatively far lower than other countries. People doubt that it can really happen due to the huge population. However, things are getting more complicated.
Cheap labor was one of the factors that have been bringing lots of foreign investments to China. However, some experts, mainly IMF, argue that cheap labor in China is going to end. IMF claims that the working age population will reach a historical peak and then decline precipitously in a few years. This means the labor supply will decrease (labor shortage) and China might not be a place for cheap labor anymore. IMF researchers argue that China will get to the Lewis Turing Point, so that wages will go up. Will this happen? If the moment does arrive, how will China react? How will the world react?