'Made in China' labor is not actually that cheap (2024)

FAQs

'Made in China' labor is not actually that cheap? ›

Making goods in China isn't actually that cheap. These days, China's labor costs are only 4% cheaper than those in the U.S. when productivity is factored in, according to Oxford Economics. That's because wages in China have risen much faster than increases in productivity.

Lower Wages

The huge labor pool in China helps to produce in bulk, accommodate any seasonal industry requirement, and even cater to sudden rises in the demand schedule.

Turns out that “made in China” is not so cheap anymore as labor costs have risen rapidly in the country's vast manufacturing sector. Chinese factory workers are now getting paid more than ever: Average hourly wages hit $3.60 last year, spiking 64 percent from 2011, according to market research firm Euromonitor.

Due to its enormous industrial scale, China is known for producing goods at low costs and in large quantities due to its unmatched cost advantages and efficiency.

In 2018, manufacturing labor costs in China were estimated to be 5.51 U.S. dollars per hour. This is compared to an estimated 4.45 U.S. dollars per hour in Mexico, and 2.73 U.S. dollars in Vietnam.

The lowest-cost countries in the study are now India, Mexico, and Vietnam. While there are even lower-cost areas of the world, the Reshoring Institute focused its study on where most manufacturers are moving to now, after leaving China.

One reason is the economies of scale that manufacturing in such a large country offers. Due to the sheer size of the Chinese market, products can be produced in bulk, achieiving economies of scale and lower manufacturing costs.

Additionally, the term, “Made in China”, is often confused with “assembled in China”. As defined by itimanufacturing, “Made” indicates all or most of the parts and components used to make the product originated from that country and were also manufactured in that same country.

Yes. Made-in-China is absolutely legit and safe.

According to data published by the United Nations Statistics Division, China accounted for 28.7 percent of global manufacturing output in 2019. That puts the country more than 10 percentage points ahead of the United States, which used to have the world's largest manufacturing sector until China overtook it in 2010.

How much do Chinese factory workers make in USD? ›

In China, where wages in the manufacturing sector have more than tripled in the past decade, the average factory worker in 2020 was paid about $6 an hour.

Slash Production Costs – US firms can slash production costs by manufacturing goods in Chinese factories (which tend to offer significantly lower production costs than their US counterparts).

Wage and Compensation

Most workers' base salary is 15 Yuan per day ($1.80), with an increase to 24 Yuan per day ($2.90) with seniority. However, the minimum wage standard stipulated by the local government is 37.284 Yuan per day ($4.73). Most workers in the factory receive piece-rate wages.

The research concluded that China can no longer be considered a low-cost country, as its labor rates have significantly increased. The lowest-cost countries in the study are now India, Mexico, and Vietnam.

China's labor costs have risen rapidly compared with other emerging market countries in recent years. Government investment is an essential factor pushing labor costs, a unique and exciting phenomenon in China.

A contemporary example: China's comparative advantage with the United States is in the form of cheap labor. Chinese workers produce simple consumer goods at a much lower opportunity cost. The United States' comparative advantage is in specialized, capital-intensive labor.