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November 2006, Vol. 129, No. 11
Labor costs of manufacturing employees in China: an update to 2003–04
Erin Lett and Judith Banister
China’s manufacturing industry is increasingly active in world trade: China’s share of total world manufactures exports was 8 percent in 2004, about the same share as Japan in that year, and up from 2 percent in 1990.1 In terms of employment, China’s manufacturing industry is the largest in the world, employing more manufacturing workers than the Group of Seven (G7) industrial countries combined.2 With the emergence of Chinese products on the international market, there has been increasing interest in the statistics of China’s manufacturing industry, particularly for hourly compensation costs (total labor costs to employers). This article updates the 2002 compensation estimates for total Chinese manufacturing, first published in an August 2005 article in the Monthly Labor Review, with data for 2003 and 2004.3
While hourly compensation costs in China’s manufacturing sector increased rapidly between 2002 and 2004, average hourly compensation in China continued to be a small fraction of that found in many of China’s largest trade partners. For example, the average hourly manufacturing compensation estimate for China in 2004 was $0.67, about 3 percent of the average hourly compensation costs of production workers in the United States for the same year.4 (See chart 1.) This percentage is virtually unchanged from the 2002 estimate. In 2004, employees in China’s urban areas continued to be compensated at a higher rate than those employed in town and village enterprises (TVES),5 $1.19 versus $0.45. (See table 1.) The gap in labor costs between the two areas increased slightly from 2002 to 2004.
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1 International Trade Statistics 2005, World Trade Organization, on the Internet at http://www.wto.org/english/res_e/statis_e/its2005_e/its05_bysector_e.pdf.
2 Chinese data are from China National Bureau of Statistics and China Ministry of Labor, compilers, China Labor Statistical Yearbook 2005 (Beijing, China Statistics Press, 2005). G7 data are from Comparative Civilian Labor Force Statistics, 10 Countries, 1960–2005 (Bureau of Labor Statistics, April 5, 2006); on the Internet at http://www.bls.gov/fls/lfcompendium.pdf.
3 For the original hourly compensation estimate for 2002 and a detailed explanation of the methods used, see Judith Banister, "Manufacturing Employment and Compensation in China," on the Internet at http://www.bls.gov/fls/chinareport.pdf or two Monthly Labor Review articles based on this report: Judith Banister, "Manufacturing employment in China," Monthly Labor Review, July 2005, pp. 11–29 on the Internet at http://www.bls.gov/opub/mlr/2005/07/art2full.pdf and Judith Banister, "Manufacturing earnings and compensation in China," Monthly Labor Review, August 2005, pp. 22–40 on the Internet at http://www.bls.gov/opub/mlr/2005/08/art3full.pdf.
4 China’s compensation data are for all employees while compensation data for other countries in this report only refer to production workers. Because nonproduction workers in manufacturing often are compensated at higher rates than their production worker counterparts, the inclusion of nonproduction workers in China’s data may affect comparability with other countries.
5 Town and village enterprise (TVE) data published by the Ministry of Agriculture are used in this article to represent employment and earnings in rural establishments. For a detailed explanation of why TVE data are used, see Banister, "Manufacturing employment in China," pp. 11–29.
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