Global Labor Arbitrage
Global trade hit a record 28% of world GDP in 2004, up from 19% in 1991. To put this in perspective, from 1986 - 2004, expansion of global trade accounted for 35% of the increase in world GDP growth, which is double the 17% increase attributable to global trade during 1974 - 1986.
Global Wage Arbitrage is an outgrowth of globalization and integration of cross-border labor markets. Wage income shares of business sector GDP in 2004 for the world’s 30 leading developed nations are down from the 53.2% during the mid-1980s, to 49.5%.
The average Chinese manufacturing worker made 12,496 yuan in 2003, which equals $29 per week. The average weekly pay for U.S. manufacturing workers was $636 per week in 2003. The Chinese manufacturing wages are 4.5% of what the U.S. wages are.
The Internet through broadband communications networks, is providing connectivity and cross border integration of labor markets. This has accelerated the pace of globalization and intensified the effects of global labor arbitrage.
Global labor arbitrage is now expanding into not just data processing, software programming, and call centers, but also engineering, design, accounting, medical technology, legal, actuarial and financial analysis.
Low wage workers in developing countries are setting wage rates at the margin in a growing number of occupations. It would take 20 years at a 20% annual Chinese wage growth rate for the Chinese manufacturing wage to equal the U.S. wage. It is safe to assume that this trend will continue for many years to come.
Global Wage Arbitrage is an outgrowth of globalization and integration of cross-border labor markets. Wage income shares of business sector GDP in 2004 for the world’s 30 leading developed nations are down from the 53.2% during the mid-1980s, to 49.5%.
The average Chinese manufacturing worker made 12,496 yuan in 2003, which equals $29 per week. The average weekly pay for U.S. manufacturing workers was $636 per week in 2003. The Chinese manufacturing wages are 4.5% of what the U.S. wages are.
The Internet through broadband communications networks, is providing connectivity and cross border integration of labor markets. This has accelerated the pace of globalization and intensified the effects of global labor arbitrage.
Global labor arbitrage is now expanding into not just data processing, software programming, and call centers, but also engineering, design, accounting, medical technology, legal, actuarial and financial analysis.
Low wage workers in developing countries are setting wage rates at the margin in a growing number of occupations. It would take 20 years at a 20% annual Chinese wage growth rate for the Chinese manufacturing wage to equal the U.S. wage. It is safe to assume that this trend will continue for many years to come.
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