The Wage Gap Between the U.S. and China Continues to Narrow

August 29, 2013

This week’s Chart of the Week examines the difference in average wages in the United States and China. As China has experienced substantial economic growth, it has also seen its average yearly wage for employed people in urban units rise from ¥9,333 in 2000 to ¥41,799 in 2011 (most recently available data). When converted and normalized into 2011 U.S. dollars, this is an increase from $1,472 to $6,468, which constitutes a 14.6% compounded annual growth rate in real dollars. On the other hand the U.S., like most other developed countries, has experienced stagnant real wage growth, fluctuating between $41K and $44K over the past decade.

A significant difference between the two wage levels remains with the average wage in the U.S. almost seven times higher than the average Chinese wage. However, many of the largest sectors of the Chinese economy are far more labor intensive and better represented by the U.S. minimum wage. The current minimum wage in the U.S. is $7.25/hr or $14,500 annually. Assuming there is no change in the U.S. real minimum wage, the Chinese average wage is on pace to surpass this in 2017.

While China has often been a cheap source of labor for businesses, wage increases could hurt the competitiveness of firms located in China. If Chinese wage growth continues on the current trend companies may decide that it is no longer optimal to produce in China. The effect this would have is twofold. As businesses leave China, the growth in the Chinese economy could slow. Secondly, this could lead to more jobs returning to the U.S., lowering unemployment and increasing wages.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content

10.10.2024

The Elusive Small-Cap Revival

U.S. small-cap equities have trailed their larger peers for over 13 years. Although the asset class has shown intermittent signs…

10.03.2024

Can Interest Rate Cuts Revive Private Equity?

It has been well documented that private equity has been experiencing pressures over the past two years, marked by declines…

10.02.2024

3Q 2024 Market Insights Webinar

— LIVE WEBINAR OCTOBER 23 — Please join Marquette’s research team for our 3Q 2024…

09.27.2024

Lower Rates, Better Fates?

With the first Federal Reserve rate cut of the current loosening cycle in the rear-view mirror, investors are now questioning…

09.19.2024

Keep Your Eye on the Labor Market

The Fed turned the page and began lowering interest rates with an outsized 50 bp cut at its September FOMC…

09.18.2024

A Cross Pacific Current

The pullback in global equity indices at the beginning of August left many investors racing to understand what had caused…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >