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Wages in China

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A reader, Patrick, pointed me toward an interesting article in the New York Times about wage increases in China. The article uses the Dahon bicycle factory in Shenzen as an example. It starts out by mentioning one worker who is making about 25% more than he was at the beginning of the year through a combination of increased efficiency and a higher pay wage. Later in the article, David Hon, Dahon’s chief executive, states that wages at Dahon’s factory have risen 10 to 15 percent a year, but that the average labor cost per bike has edged downward. He says this is possible because of savings from large-scale production as Dahon’s sales continue to grow 30 percent a year.

I am very happy to see the average wages of Chinese factory workers increase. Make no mistake though; labor savings from economies of scale, as cited in the Dahon example, only go so far. The prices of goods from China, including bicycles, are going to continue to rise steadily in the coming years as more Chinese workers demand higher wages (and as the cost of raw materials and shipping continue to increase). Some factory owners have been reluctant to pay the higher wages that workers want. Instead they cite the country’s labor shortage as the reason that they can’t meet production and fulfill orders. All the while, at many factories job seekers are literally lined up outside the factory gates looking for work at a fair wage. At some point, the factory owners, and especially the companies that use them to produce goods, have to agree to pay the higher wages (and associated higher product costs) and pass that cost on to the consumer. That is the way a free market economy works and that is the way I believe things are slowly moving in China.

I don’t expect bike frames made in China to cost anywhere near as much as frames made in Europe of the U.S. in the foreseeable future, but the price discrepancy needs to close somewhat. I would think that higher overseas labor and shipping costs would provide some incentive for some bike companies to consider increasing domestic production in the near future. I am just curious how some of you industry folks reading this think the trend toward higher product costs in Asia will affect European and American bike companies. Any thoughts to share?

Oh yeah, one more thing. How is this for a weak segue? If you want to carry a load like the guy in this picture, but don’t have the right machine for the job, you can always make your own cargo bike using a shopping cart. Yikes! I’d definitely watch out for potholes if I were riding this thing.

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1 Comment

  1. Anonymous October 20, 2007 at 11:28 pm -  Reply

    Shocking that there are no comments about this. Mention wages in the bike industry and everyone runs for cover.
    Price compression at the mass market level has left bicycle factories a very undesirable place to work. It is a minimum wage for a job in a factory of heavy manufacturing (welding, dipping frames in acid baths with no protective equipment on, painting in hot non-ventilated booths etc.)

    The “smart” factories figured that you could get away with the same labor cost on a $20 (FOB China) adult mtb as you can a $1000+ (FOB China) carbon bike. Make no mistake , there are people lining up outside factories for jobs but it isn’t the in bike industry – it is usually electronics factories where the work is cleaner and generally better paying.

    How am I qualified to make this statement? I have worked in the industry for 10 years and have just launched a new brand – Kind Bicycles, where our main mission is to bring this social injustice to light.

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