Friday, December 3, 2010

The Fate Of College Graduates In China

FLG found this Room for Debate about the difficulties facing Chinese university graduates extremely fascinating.
According to recent statistics, the average Chinese college graduate makes only 300 yuan, or about $44, more a month than the average Chinese migrant worker. In recent years, the wages of college graduates have remained steady at about 1,500 yuan a month. Migrant workers' wages, however, have risen to 1,200 yuan.


What does the imbalance say about China's education system and its economy in general?

However, none of the respondents discusses what first came to FLG's mind, a more long run, structural explanation -- the Heckscher–Ohlin model. The HO model explains that the returns will go to the relatively abundant factors. In China, the relatively abundant factor is low-skilled labor. Therefore, college graduates, who supposedly represent high skilled labor, are bound to lose out, relatively speaking.


Anonymous said...

I halfway buy this. No, maybe a quarter. USA has had a comparative advantage in the sophisticated stuff, research, etc. But even in the high-end areas, we can be and are being underbid, and by China, and Chinese enterprises do need skilled and trained people to do this stuff. I'm going to bet on worldwide trend towards relatively equal compensation, both for skilled and unskilled. dave.s.

FLG said...

I think you are arguing in favor of factor price equalization.

Alpheus said...

There's a fairly interesting book that uses Hecksher-Olin/Stolper-Samuelson to explain all sorts of historical and political trends. Interesting stuff on Greece and the Roman Empire (although the author was clearly more interested in other things).

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