Yuan & Farewell: Why Money Hasn't Changed The Standard Of Welfare In China


Although the migrant population in China has received an annual pay rise of 15%, the other story of related welfare hasn't been covered. C+E Economist expert Scott Sumner provides some thoughts on why that might be. 

Here’s some data on Chinese incomes:

That means the migrant worker population (almost as large as the US population) got roughly a 15% pay increase last year in real terms.  Have so many people gotten so much richer in such a short time in all of human history?  I doubt it, although you could argue that human welfare increased even faster in the early 1980s, after Deng freed up Chinese agriculture.  Why will this story receive little attention in the press?

1.  Nationalism.  

We care more about growing inequality in America than shrinking inequality in China.

2.  Euro-centrism.  

The pain inflicted on a few million Greeks due to austerity is a more interesting story to reporters of European descent that the welfare of hundreds of millions of East Asians.

3.  There’s no such thing as good news.  

If it’s not bad, it’s not news.  The only exception is if something really bad ends in a particularly dramatic way—say the fall of the Berlin Wall.

4.  It’s a contrarian story that doesn’t fit the dominant narrative.  

The Chinese move toward capitalism really did make things more unequal in China during the 1990s (but not the 1980s), and perhaps (this is debatable) even in the US. The recent reversal in China toward increasing equality was inevitable, but just doesn’t fit our current concern over inequality.

5.  People don’t believe the story is true.  

Actually it is (roughly) true, but I find that when contrarian data is presented, people don’t like to adjust their prior beliefs, they’d rather argue the Chinese government is faking the data.  Even though this is the same government that 10 years ago was reporting increased inequality and near-zero wages for the poor.

The world is rapidly transitioning from a place where residents of rich countries can’t even comprehend the way of life in poor countries, to one where people will all live recognizably similar lives.  The current inequality trends in the US look bad, but it wouldn’t surprise me if we saw a reversal in those trends as well.  The entire world is evolving toward a near 100% service economy in terms of jobs (not output.)  I can’t imagine why low-skilled workers would not be able to do the “jobs of the future,” (which will be serving others) but perhaps I’m missing something.  I’m more worried about my job being replaced by the Khan Academy.  I suppose the big public policy issue will be deciding who should get to allocate all the wealth that will be accumulated by those with great ideas (or rents.)  Should the government or the wealthy get to decide which charities are most deserving?

Consumption inequality won’t be a big issue, especially if there are luxury taxes on big houses, yachts and private jets.  Bill Gates doesn’t need 750 washing machines.

HT:  Free Exchange