Lessons on Economics for NYT: China's "Labor Shortage"

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Friday, 08 February 2013 05:38

An article on Hewlitt-Packard's decision to require suppliers in China to not use involuntary labor from students told readers:

"Enforcing workplace rules in China has always been difficult, as even Chinese laws on labor practices are flagrantly ignored by some manufacturers as they struggle to keep up with production demand amid labor shortages. The Chinese government announced last month that the nation’s labor force had begun to shrink slowly because of the increasingly rigorous one-child policy through the 1980s and 1990s."

In a market economy, firms that can't operate profitably paying the prevailing wage are supposed to go out of business. This is what happened to millions of small farms in the United States between 1860 and 1960. These farms could not afford to pay wages that were competitive with the wages that workers could get in manufacturing.

If the NYT were covering this process today presumably it would be complaining about the labor shortage resulting from the failure of people in the United States to have enough children. Of course to workers at the time this process implied an enormous improvement in living standards. The same will be the result of the news that the NYT seems to think is so dire, that China's labor force is now shrinking.