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Recent developments in China's labor market: Labor shortage, rising wages and their implications

Author

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  • Yuming Cui
  • Jingjing Meng
  • Changrong Lu

Abstract

China's abundant supply of cheap labor has played an important role in its remarkable economic and social development. Recently, however, China has experienced a labor shortage and rising wages, implying that the country's long‐lasting competitive advantage based on its “unlimited” labor supply and low costs is vanishing. We find that structural demographic changes, regional economic growth disparities and the household registration system may have caused the labor shortage. Furthermore, China's continued low wages, relatively low labor share of gross national income, declining proportion of household consumption to GDP, and productivity improvements as well as increasing unit labor costs can be used to explain the recent wage increases. The dramatic development of its labor market signals that China is entering a new stage of economic development. The country's prior successful model of economic development needs to be adjusted to adapt to the new situation in its labor market to achieve sustainable economic development.

Suggested Citation

  • Yuming Cui & Jingjing Meng & Changrong Lu, 2018. "Recent developments in China's labor market: Labor shortage, rising wages and their implications," Review of Development Economics, Wiley Blackwell, vol. 22(3), pages 1217-1238, August.
    • Handle: RePEc:bla:rdevec:v:22:y:2018:i:3:p:1217-1238
    DOI: 10.1111/rode.12391
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    Cited by:

    1. Jiahong Yuan & Xiaoyu Li & Zilai Sun & Junhu Ruan, 2021. "Will the Adoption of Early Fertigation Techniques Hinder Famers’ Technology Renewal? Evidence from Fresh Growers in Shaanxi, China," Agriculture, MDPI, vol. 11(10), pages 1-17, September.
    2. Garg, Teevrat & Gibson, Matthew & Sun, Fanglin, 2020. "Extreme temperatures and time use in China," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 309-324.
    3. Xuecun Zhao & Yanrong Liu, 2022. "Effects of housing demolition on labor supply: Evidence from China," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1663-1692, August.
    4. Roman Matousek & Chunchao Wang, 2021. "The economic challenges and opportunities of urbanization and migration in China," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 3-5, February.
    5. Muriel Périsse & Clément Séhier, 2019. "Analysing wages and labour institutions in China: An unfinished transition," The Economic and Labour Relations Review, , vol. 30(3), pages 400-421, September.
    6. Li, Feng & Xiao, Jing Jian, 2020. "Losing the future: Household wealth from urban housing demolition and children's human capital in China," China Economic Review, Elsevier, vol. 63(C).
    7. Dou, Huan & Pang, Xinyuan & Ke, Huan & Liu, Yuanyuan, 2024. "Pain or gain? The effects of transportation infrastructure on labor costs in China 1," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 413-431.
    8. Holly Blake & Betsy Lai & Emil Coman & Jonathan Houdmont & Amanda Griffiths, 2019. "Move-It: A Cluster-Randomised Digital Worksite Exercise Intervention in China: Outcome and Process Evaluation," IJERPH, MDPI, vol. 16(18), pages 1-23, September.
    9. Horbach, Jens & Rammer, Christian, 2020. "Labor shortage and innovation," ZEW Discussion Papers 20-009, ZEW - Leibniz Centre for European Economic Research.
    10. Zhen Li & Yu Zhu & Yingji Wu, 2024. "Migrant Optimism in Educational Aspirations for Children in Big Cities in China: A Case Study of Native, Permanent Migrant and Temporary Migrant Parents in Shanghai," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 43(1), pages 1-30, February.
    11. Shuo Ding, 2022. "A Comparative Analysis of Vulnerability to Poverty between Urban and Rural Households in China," Economies, MDPI, vol. 10(10), pages 1-28, October.
    12. Lee Shinyoung & Kim Seulki & Kim Young-Chul & Ryu Doojin, 2024. "Social Support and Suicidal Ideation among Children of Cross-Border Married Couples," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 18(1), pages 1-17.
    13. Muwei Xi & Dingqing Wang & Ye Xiang, 2023. "Fiscal Expenditure on Sports and Regional Carbon Emissions: Evidence from China," Sustainability, MDPI, vol. 15(9), pages 1-15, May.
    14. Chih‐Hai Yang & Meng‐Wen Tsou, 2021. "Globalization and the labor share in China: Firm‐level evidence," Manchester School, University of Manchester, vol. 89(1), pages 1-23, January.
    15. Li, Feng & Xiao, Jing Jian & Cai, Feiying, 2019. "Wealth, labor supply and life satisfaction: The case of urban housing demolition in China," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    16. Shuo Yang & Tianheng Shu & Taofang Yu, 2022. "Migration for Better Jobs or Better Living: Shifts in China," IJERPH, MDPI, vol. 19(21), pages 1-18, November.
    17. Hao, Yu & Zhang, Zong-Yong & Yang, Chuxiao & Wu, Haitao, 2021. "Does structural labor change affect CO2 emissions? Theoretical and empirical evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 171(C).

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