301:"Rising wages are most significant to primary producers and services industries, as labor takes the major share of total costs in these sectors,". Apart from labor, capital - still relatively cheap in China - will also become more expensive as policymakers move the country toward interest rate liberalization. Material costs, too, will continue to rise and will reach global levels. As the economy slows down, it becomes harder and harder for companies to pass on the costs to customers. China's rising labor costs will help other South Asian countries gain a foothold in low-end manufacturing.
246:, which has until recently provided an ultimate source of cheap labor,". But it warned that the massive reallocation of labor "from low productivity agriculture to higher productivity manufacturing is coming to an end". Even before the Chinese economy started to turn down, there were concerns that it was facing a
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Because there is a large supply of workers, especially in rural sector, wage growth for unskilled labor will grow slowly. At the same time, âwage growth for skilled labor will also likely taper off because of the convergence of college wage premiums to international standards in recent years and the
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Labour costs have been rising across Asia as Asians now are more willing to pay a premium for the products and services they receive and thus causing production cost to increase. Many countries in Asia have seen a rapid rise in wages since the late 2000s. One factor contributing to the wage rises is
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Labour costs in China and India have been increasing over the years. China was initially one of the lowest labour cost countries known. However, due to the rising demands of people and the increase in the cost of goods, China is no longer regarded as the âcheapestâ country to manufacture goods
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in China has been increasing at a slower pace since 2005. Although there are 320 million laborers still in agriculture, only 20 million have the potential to migrate to cities, pushing the country to a point at which "the excess labor in the
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anymore. China is now deemed as less competitive compared to other countries. The increased labour costs have resulted in some foreign firms exiting the country, in search of countries where labour cost is cheaper, like
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Aside from price other reasons for engaging in global sourcing can include improved manufacturing capacity/ time frames, quality of goods, improved customer services and logistics benefits.
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The process of low-cost sourcing consists of two parties. The customer and the supplier countries like US, UK, Canada, Japan, Australia, and West
European nations are considered as
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286:, or household registration, system. âHowever, these are unlikely to reverse the trend of increasing labor costs". They will continue to rise as minimum wages and
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led to a growth in manufacturing. However, eventually, the phenomenon comes to an end as wages rise and the country's competitive edge disappears. The number of
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The primary principle behind LCCS is to obtain sourcing efficiencies through identifying and exploiting opportunities of price reduction between geographies.
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anticipated robust supply of university graduates and professionals returning from overseasâ. Therefore, overall wage will slowly grow in the near future.
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111:, modern infrastructure and acceptably compatible legal system are considered to be ideal for sourcing. Examples and most popular regions are China,
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is not yet a major problem in China, as there are still governmental measures to free up the pool of rural labor, such as the further easing of the
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Not necessarily all "low cost countries" are destinations for LCCS. Only those countries with relatively stable political and economic
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354:"India and ASEAN Economies to Become the Next China for (Manufacturing) Foreign Direct Investment (FDI)"
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improve, adding that on top of the 13 percent annual increase in the minimum wage as set in the 12th
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due to the shift of labour from agricultural work into more productive jobs in industry, labour
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at a lower cost, leaving manufacturers with more choices as regards their suppliers.
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report says that "Wages have been pushed up by long-term decline in the aggregate
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strategy in which a company sources materials from countries with lower
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Yang, Dennis Tao; Chen, Vivian Weijia; Monarch, Ryan (1 October 2010).
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J Ă N K Ă P I N G I N T E R N A T I O N A L B U S I N E S S S C H O O L
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are gradually increasing. Businesses will thus face pressure on their
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49:(HCC) whereas resource rich and regulated wage labor locations like
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sector is fully absorbed into the modern sector, and where further
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38:. LCCS falls under a broad category of procurement efforts called
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250:, widely identified by economists as showing the danger of a
224:. Other countries apart from China are beginning to provide
446:"Rising Wages: Has China Lost Its Global Labor Advantage?"
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begins to increase wages" - pointing to a Lewis scenario.
521:"Higher productivity to counter rising labor costs"
85:(LCC). In low-cost-country sourcing the material (
406:"Asia Soaring Wages Mean Rising Prices Worldwide"
188:growth. Workers will demand for better wages as
503:"China Labor Cost Rise to Boost Rivals in Asia"
339:. Master thesis within BUSINESS ADMINISTRATION.
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333:"Problems and Challenges of Global Sourcing"
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394:(Report). Overseas Development Institute.
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387:Steve Wiggins and Sharada Keats (2014).
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184:has increased quickly thus leading to
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34:and production costs in order to cut
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89:) flows from LCC to HCC while the
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501:Katy Barnato (17 January 2013).
462:10.1111/j.1468-0106.2009.00465.x
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432:China Productivity Imperative
594:Global business organization
359:International Business Times
319:"Low Cost Country Sourcing"
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559:Offshore software R&D
20:Low-cost country sourcing
450:Pacific Economic Review
93:flows from HCC to LCC.
81:nations are considered
554:Offshore outsourcing
527:. 26 September 2012.
269:capital accumulation
16:Procurement strategy
589:International trade
544:International trade
389:Rural wages in Asia
252:Lewis Turning Point
47:high-cost countries
408:. Bloomberg. 2013.
362:. 25 January 2013.
275:Situation in China
248:middle income trap
83:low-cost countries
36:operating expenses
233:Ernst & Young
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182:productivity
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584:Procurement
525:China Daily
471:10419/36801
265:subsistence
237:labor force
222:Philippines
109:environment
103:Destination
28:procurement
578:Categories
564:Offshoring
305:References
204:as rising
91:technology
488:152701486
480:1468-0106
190:Singapore
113:Indonesia
59:Indonesia
533:See also
218:Thailand
161:Cambodia
145:Bulgaria
129:Ethiopia
125:Malaysia
117:Thailand
87:products
505:. CNBC.
434:ey.com
231:A 2012
165:Hungary
157:Bolivia
149:Albania
141:Romania
137:Ukraine
121:Vietnam
63:Bolivia
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153:Mexico
77:, and
75:Mexico
71:Russia
67:Brazil
32:labour
484:S2CID
392:(PDF)
284:hukou
241:rural
133:India
55:India
51:China
26:) is
476:ISSN
220:and
196:and
186:wage
167:and
24:LCCS
466:hdl
458:doi
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