There is, however, a competing bias in city manufacturing employment and earnings data. Indirect evidence indicates that many city manufacturing workers are not included in these numbers at all. In particular, the lower paid migrant manufacturing workers seem to be considerably underrepresented in the reported urban employment data for cities, and the earnings of most of the comparatively poorly paid migrant workers in general also appear to be excluded from urban manufacturing earnings data. Whether the net result of these competing biases is to underreport or overreport earnings of the average urban manufacturing employee for 2002 is unclear; however, it is likely that the exclusion of the more stagnant earnings of many rural-to-urban migrants leads to some exaggeration of the trend of rising average earnings in city manufacturing for the 1990- 2002 period.
The analysis that follows discusses the cost to employers of employee compensation and the competitiveness of Chinese manufacturing in the global economy. For comparative purposes, official exchange rates were used to convert compensation costs to U.S. dollars. The official exchange rate is the appropriate conversion rate for compensation cost comparisons, because it reflects the cost in U.S. dollars that employers must actually pay for Chinese labor. Compensation costs converted with the use of commercial exchange rates do not, however, indicate relative living standards of workers or the purchasing power of their income. Therefore, this report also includes estimates of the take-home pay of China’s manufacturing workers calculated using the purchasing power parity exchange rate between Chinese yuan and U.S. international dollars.
As will be demonstrated in the analysis, the numbers frequently published in the global and U.S. popular media on the low compensation of China’s manufacturing workers ($0.40-$1.50 per hour) are within the realm of reasonable estimates. China is indeed a relatively low wage manufacturing environment, and the country also enjoys other advantages that give it a competitive edge over many other manufacturing locations around the world.
The Bureau of Labor Statistics has been a leader in compiling international comparisons of hourly compensation of manufacturing workers over a wide range of countries. Despite its large and growing importance in world manufacturing, China has not been included in the comparisons because of difficulties in obtaining and interpreting that country’s data and because of concerns about the quality of the data. Although the two Monthly Labor Review articles by Judith Banister have greatly facilitated understanding of Chinese employment and compensation statistics, many problems with data availability, coverage, and reliability remain, as described in the articles. Therefore, the Bureau does not plan to include China in its regular comparisons of hourly compensation costs at this time. These articles and the associated report on the BLS Web site, which have been funded by the Bureau, are intended as first steps toward developing the measures necessary to include China in the regular comparisons series that currently includes 31 countries. Because of the widespread interest in expanded country coverage, the Bureau is indeed considering providing data on China, along with data on some other countries, the quality of whose data is problematic, but in a separate format with appropriate annotations. As better data become available, China and other countries could be moved into the regular comparisons series.
Division of Foreign Labor Statistics, Bureau of Labor Statistics