A Changing Chinese Economy Has Resulted in Significant Labor Shortages

question 14

Multiple Choice

A changing Chinese economy has resulted in significant labor shortages. Factories continue to expand as
China’s economy grows, but the number of uneducated workers is declining and the population of young
people is leveling off. Add to these an increased number of people remaining inland, and this leaves coastal
regions which specialize in factory production and exports with a large number of job openings.
The labor shortages are resulting in wage increases, pushing up costs on Chinese -made products. This could
make China less competitive in global markets. Anticipating a continuation of rising costs for Chinese
manufacturing, international manufacturers are already looking at moving factories to countries with lower
costs.
The increase in wages is also fueling a growing Chinese middle class. Minimum wages in big cities have
grown roughly 25% over the past three years, and infrastructure, housing and retail projects have started to
develop in more rural areas. The number of people going to college has also increased significantly. In 2005,
over 14 million people enrolled in Chinese colleges and universities, an increase of more than 250% since
1999.
Labor shortages and the resulting cost and wage increases may prompt even more changes in China. Labor
conditions and worker benefits have already started to improve, and increased manufacturing costs could
cause a shift away from the production of lower-end products. Rising wages could create an increased
demand for imports, and factories have started moving inland, where labor is more readily available
-According to the Application, the number of people in China who are going to college has increased significantly. An increase in college enrollment leads to a more educated workforce and, in turn, higher wages. Obtaining an education in order to receive a higher wage is an example of which element of the economic way of thinking?

• A)thinking at the margin
• B)response to incentives
• C)isolation of variables
• D)using assumptions to simplify

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Definitions:

Employ Employees

The act of hiring individuals to perform services or tasks for compensation.

Partnership Business

An officially recognized form of enterprise undertaken by two or more participants, who equally manage the business and its profits.

Agent

A person authorized to act on behalf of another, often in business transactions.

Employee

An individual who provides labor or services to another person or business in exchange for compensation under agreed terms.