Does globalisation mean a “race to the bottom”, where wages worldwide are pulled down to the levels in the poorest countries?
The economist Richard Freeman’s analysis is often used to support the idea. About a decade ago he wrote some articles about what he called “the Great Doubling”.
By this he meant the increase in the global labour force as a result of China, India and former Soviet states integrating fully into the world market.
Had they stayed outside, the global workforce would have been 1.46 billion people in 2000, Freeman argued. Including them it was double that, 2.92 billion.
He concluded that “by giving firms a new supply of low-wage labour, the doubling of the global workforce has weakened the bargaining position of workers in the advanced countries and in many developing countries as well”.
But a recent study by the research group Euromonitor shows that a much more complex process is at work.
Its results are summarised by the Financial Times newspaper, “Average wages in China’s manufacturing sector have soared above those in countries such as Brazil and Mexico and are fast catching up with Greece and Portugal after a decade of breakneck growth that has seen Chinese pay packets treble.
“Across China’s labour force as a whole, hourly incomes now exceed those in every major Latin American state apart from Chile, and are at around 70 percent of the level in weaker eurozone countries.”
Thus, in 2005-16, the period since Freeman first published his articles, average hourly wages in China’s manufacturing sector trebled. But they fell in Brazil, Mexico, South Africa and most steeply in Portugal—from £5.15 to £3.68 an hour.
This is a combination of three processes.
First, China has become the most important hub of global manufacturing production.
This has involved in part foreign direct investment by transnational corporations setting up subsidiaries in China. But transnationals often outsource production in the Global South to other companies, as John Smith points out in his important book Imperialism in the 21st Century.
The aim is to shift costs onto the subcontractors and the workers. Taiwanese company Foxconn is a classic example. It has come under much fire for how it treats its workers in the Chinese factories where they assemble Apple products.
Chinese workers’ resistance to conditions like these have helped to push up wages—not just in manufacturing but across all sectors. But Chinese industry is also becoming more sophisticated, with productivity rising faster than pay.
Manufacturing production no longer always needs to rely on ultra-low labour costs. Firms may often find it profitable to pay more to hold onto their more skilled workers.
Secondly, however, the advance of China puts pressure on manufacturing industry in other more developed Southern economies such as Brazil and South Africa.
Firms there are compressing wages to compete with cheaper and more efficient Chinese rivals.
Finally, we see similar processes in southern Europe, whose manufacturing industries compete increasingly with China and other “emerging market” economies.
This downward pressure on wages is reinforced by the austerity imposed on countries such as Greece and Portugal by the dominant forces in the eurozone. Chronic mass unemployment and shortage of demand must have contributed to the fall in Portuguese manufacturing wages.
Understanding this complex process of both upliftment and impoverishment is important if we are to stop the bosses pitting Western and Chinese workers against each other.
It’s a step forward for the entire world working class that Chinese workers have been able to triple their wages in a decade. There was nothing inevitable about this.
The Chinese state and bosses wouldn’t have reacted without pressure from the workers themselves. Nor was anything inevitable about the failure of workers’ movements elsewhere to resist wage repression.
The more we learn from each other, the more we can advance together.
Crises are on the horizon