Earlier this week, we held a really informative web conference with Dr Eli Friedman of Cornell University.

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Dr Friedman spoke about growing incidents of worker unrest in China, the workshop of the world. This mostly takes the form of unofficial strike action and work stoppages. In the past, this has often been over non-payment of wages, but worker unrest is becoming more assertive and workers are increasingly demanding better terms and conditions.

However, they are hampered in this by tight regulation on migrant labour, which means that many workers only live in industrial cities for a few years before returning to rural villages, and thus have less incentive to fight for long term quality jobs.

China’s official unions are state controlled and workers do not elect their own representatives. Nonetheless, the Chinese unions have reacted by mediating in the unrest, and have driven through new collective agreements and wage deals. The cumulative effect of this – and of a labour shortage in China – is that wages in China are rising.

Since cheap Chinese labour has been used by employers to drive down wages across the world in a race to the bottom, this has interesting implications for union bargaining, particularly in the manufacturing sector.

Will wages rise across the world, or will production simply shift somewhere cheaper, perhaps sub-Saharan Africa?

Dr Friedman believes a major geographic shift in production is unlikely, as China currently has the vital infrastructure necessary to sustain large scale industry. Few other places in the world have this capacity. However, there is likely to be a shift in low value added production, such as textiles, as China moves up the value chain.

The effect of this is that it is increasingly financially viable to create and maintain quality manufacturing jobs in Europe and North America, especially with recent productivity increases. It may no longer be viable for companies to shift production to the Far East, as wages trend upwards to converge on standards in OECD countries.

Another factor in China is a situation which is common across the world – unemployed and under employed graduates, as the Chinese higher education system produces more graduates than the slowing economy can absorb. Dr Friedman believes they will have an important role to play in China’s political developments over the next few years.

We apologise for the echo in the audio – this is an sometimes an unfortunate consequence of doing transatlantic interviews, and was unavoidable in this case.