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Economy

Salary Hikes In Asia: What It Means For The Western World

Asia is going through its own so-called "Fordist" phase, as countries are introducing minimum wage standards and multiplying some salaries by five in order to turn citizens into consumers. But what does this mean for the rest of the worl

Workers at the Seagate Wuxi Factory in China (Robert Scoble)
Workers at the Seagate Wuxi Factory in China (Robert Scoble)
Jean-Marc Vittori

PARIS - On April 1, the minimum wage will increase by 40% and automobile manufacturers are rubbing their hands together with glee: they will be able to sell even more cars. This is not a joke, but unfortunately we're not talking about the situation here in France.

Next month the minimum wage will increase by almost half in Thailand, having already gone up by 20% in the Shenzhen region of China last month. In Indonesia and the Philippines, the governments are strongly encouraging businesses to increase their employee ranks. A minimum wage will be introduced in Malaysia and also, surprisingly, in very free-market friendly Hong Kong. Salaries are soaring all over the continent.

As is more and more often the case in Asia these days, it was China that started the movement, giving governments and employers in neighboring countries vital room to manoeuver. And as has been the case for the last three decades, these changes are taking place very rapidly: the average salary in China has increased by 500% in the past decade!

We need to rethink how we view the world economy. The huge gap between European and Asian salaries is reducing at top speed, and in some places it is now no more than a small ditch – in several areas of China, the minimum salary is now the same as in Romania and Bulgaria.

Good news, bad news

Almost a century ago the US entered a self-perpetuating cycle whereby salary hikes encouraged consumer demand following Henry Ford's decision, in 1914, to double the pay of his workers. Europe followed suit after World War II more than 50 years ago -- and now it is Asia's turn. The initial situation is the same; an industrial revolution that has provoked massive increases in productivity. But the agenda today is different: the US is without a doubt the driving force, its influence way above that of the social movements. Salary increases fit perfectly with current policies to rebalance growth by focusing on consumption-orientated growth instead of exportation and investment.

For Europeans and Americans, Asia's Fordist swing is both good and bad news. Good news, because external pressures on salaries, often crippling, will significantly decrease. Bad news, because Fordist Asia will become more and more self-sustained. However, it would be foolish to expect the majority of growth in Europe and America to come from Asia's new forces of Fordism. Which brings us to a crucial question: how can we continue to increase productivity on a planet whose natural resources are getting scarcer and scarcer?

Read the original article in French.

Photo - Robert Scoble

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