Why a pay raise for workers signals key shift for China’s economy

Christian Science Monitor: Why a pay raise for workers signals key shift for China's economy

Workers at Foxconn and Honda won hefty pay raises this week. Higher wages will help Beijing move China's economy away from relying on masses of unskilled workers and toward higher-value manufacturing.

When two giant employers in southern China  offered their workers big wage increases this week, their goal was to dampen labor unrest. But the hikes do more than soothe factory floor anger; they signal huge changes in the way “the workshop of the world” is feeding global consumers.

Rising salaries, say economists and labor experts here, are sounding the death knell for the production system that has fueled much of China’s phenomenal economic growth for the past three decades. Instead of relying on huge numbers of workers making miserable wages at unskilled jobs, and churning out cheap exports, the government is keen on moving up the value chain.

At the same time, rising incomes are laying the foundation for another seismic shift in China’s development model, as the government seeks to base economic growth more on domestic consumption and less on exports. …