Monday, November 22, 2010

Who earns more in China, college or junior high school graduates?

The Wall Street Journal's China Real Time blog has written up research on a subject I've been mentioning for a while in talks: the tiny premium a university education may offer in China today.

The research, by a giant in the field of demographic research in China, Cai Fang of the Chinese Academy of Social Sciences, finds that Chinese university graduates earn, on average, only RMB300 or about US$44 more than migrant workers. Migrant worker earnings are converging with university graduate earnings. Remember that many workers in China's export factories didn't even graduate from high school - many often stop after junior high. In Guangdong province, the situation may be even more extreme: According to my own unscientific studies, in Guangzhou today, you can hire a university graduate with good, serviceable English for RMB2200 or US$331 a month. Factory workers in the same city or nearby Foshan might earn the same. (On an hourly basis, migrants still likely earn less, because they work longer hours.)

Given what we know about Chinese factory worker wages lagging behind economic growth, I have long been fascinated to know how this situation compares with the US. We know there is an emerging shortage of people who see work on a Chinese assembly line as a career - this is driven by demographics, in part, but also by a shift in worker mentality (that is itself difficult to separate from the demographic change). And we know that there are lots more people going to university in China, as there are in lots of other countries.

How does this compare with the situation in the US? Are wages for comparable jobs in the US already the same? It's very hard to do an apples to apples comparison, given how different these economies are, and how many possible professions there are to compare. But the US Bureau of Labor Statistics does conduct surveys of annual wages. Taking two jobs that might be similar to the ones I'm thinking of in China (factory worker and entry-level white collar administration job), the salaries are not that different, according to this data: They're both around US$31,000 a year.

I'm loathe to draw larger conclusions yet, but given what we know about what's happening with Chinese factory wages, it's likely that Chinese factory wages will soon exceed those of the entry level administration positions, at least in shortage-prone areas like Guangdong. Depending on where you sit (in Bentonville, Arkansas, say, or the offices of a labor advocacy group in Hong Kong), this might be a good thing or a bad thing. But it does put the value of a university education in China in a new light. What do you think?

1 comment:

Anonymous said...

It's a very interesting point but it's not a whole lot different in Japan.
Factory workers with high school diplomas who have four extra years of work under their belt by a certain age X earn amounts fairly similar to the college graduates with four years less experience by the same age X....until the latter reaches a certain threshold in their early to mid 30's when the latter's salary suddenly jumps...and the difference finally starts to show substantially. I know because I've been there! Initially, It doesn't even matter all that much even if you are a trilingual Ivy-league graduate with degrees in Computer Science and EE. >< What's interesting though is what happens in the future as automation becomes even more advanced. Suddenly, the college graduates are far more likely to still keep their jobs or find even better jobs, but the high school / junior high people will have nothing to do with a significant probability. But as long as manual labor continues to have a certain level of compelxity that is too costly to imitate with robotics, manual labors will command a certain reasonable level of wages....and maybe, it's not such a bad thing after all.