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Economics (3rd edition): Making sense of the Modern Economy by Saugato Datta

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2 How economies grow

Reserve army of underemployed

Is China’s pool of surplus labour drying up?

WHAT IS THE SINGLE most important price in the world? Popular answers are the price of oil, American interest rates or the dollar. Yet Chinese wages are, arguably, more important. China has by far the world’s biggest labour force, of around 800m – almost twice that of America, the European Union and Japan combined. Thus recent claims that it is running short of cheap labour would, if true, have huge consequences not just for China, but also for the rest of the world.

A seemingly unlimited supply of cheap workers has been one of the main forces behind China’s rapid economic growth. But over the past couple of years, factory owners have complained of ...

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