Market forces always work to whatever extent that governments let them, and they always tend to work toward long-term good. Case in point: China, where labor shortages are working to slow growth in the nation's economy. An article in today's New York Times notes,
Persistent labor shortages at hundreds of Chinese factories have led experts to conclude that the economy is undergoing a profound change that will ripple through the global market for manufactured goods.
The Well Brain International factory in Shenzhen, China, an appliance maker, has improved salaries and benefits to try to hire more workers.
The shortage of workers is pushing up wages and swelling the ranks of the country's middle class, and it could make Chinese-made products less of a bargain worldwide. International manufacturers are already talking about moving factories to lower-cost countries like Vietnam.
At the Well Brain factory here in one of China's special economic zones, the changes are clear. Over the last year, Well Brain, a midsize producer of small electric appliances like hair rollers, coffee makers and hot plates, has raised salaries, improved benefits and even dispatched a team of recruiters to find workers in the countryside.
That kind of behavior was unheard of as recently as three years ago, when millions of young people were still flooding into booming Shenzhen searching for any type of work.
A few years ago, "people would just show up at the door," said Liang Jian, the human resources manager at Well Brain. "Now we put up an ad looking for five people, and maybe one person shows up."
The Times article points out a potential negative consequence, higher prices for consumer goods in the United States. Here again, however, market forces solve the problem without government interference, as the article notes: lower-labor-cost nations such as Vietnam and India will step up their production, and the Chinese economy will shift to higher-end products, allowing costs for those items to drop in the United States.