The Washington Post is Worried About Rising Wages in China

November 16, 2013

That is the only plausible way to interpret its assertion in an article on China’s decision to relax its one-child policy that referred to a “looming shortage of labor.” China has hundreds of millions of people unemployed, under-employed, or working in low productivity and therefore low wage jobs. If the labor market begins to tighten these people will be absorbed in higher productivity, higher paying sectors of the economy. That is the way economies develop.

The United States used to have more than half of its workforce employed in agriculture. This share shrank rapidly as better paying jobs opened up in manufacturing. The Washington Post undoubtedly would have said the United States suffered from a labor shortage during this period.

The piece also notes China’s aging population as a reason for relaxing the one-child policy. With productivity growing at rates of 6-7 percent annually, if only a small portion of these potential wage gains are taxed away, it could easily cover the cost of caring for an aging population.


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