What the Honda strike in China reveals

The Foshan Honda factory, in China, has been experiencing an unusually lengthy strike lately on salary claims, that could be a starting point for factory wages to rise significantly in the near future. The fact for the strike to be allowed so far to continue, shows that salary increases might be henceforth encouraged by the Chinese Government as a way to fuel a domestic demand led economic growth. The strike actually emphasizes two major opposite trends in the chinese job market: the continuous pressure on salaries for young graduates and the increasing shortage of young skilled workers, which provide the latest with an increasing power of negotiation.

According to an article by the New York times, dated May 31, "the wages of young graduates have actually declined in recent years as China has rapidly expanded its universities and built new ones, creating a surplus of more highly educated workers." There would be a glut of young graduates, with the result that an increasing number of them would be currently unemployed.

The increasing proportion of young chinese going to university joint with the results of the one child policy, would have opposite consequences on young skilled workers, whose declining number produce workforce shortages and set them in a position to claim for higher wages.

China could therefore see it's low wage advantage dwindle in coming years, with some companies already looking for other places, such as Vietnam or Cambodia, to relocate.