A Study On The Impact Of The Increase Of Labor Cost On The Upgrading Of Manufacturing Structure

Since joining the World Trade Organization, China manufacturing industry has experienced a period of rapid development. The advantage of labor cost attracts a large number of Multi-National Corporation to pour in and set up factories, because of this, China turn to be the center of world manufacturing industry. However, with the arrival of "Lewis Turning Point", the promulgation and implementation of Minimum Wage standard and the tide of salary rising, our manufacturing labor cost is going up. During the development of China’s manufacturing industry, we rely on low labor cost and so the structure of our manufacturing industry upgrades slowly, what’s more, manufacturing products is at the bottom of International Industry Value Chain, and the rise of labor cost result in weakening the international competitiveness of China’s manufacturing industry products. Particularly, influenced by Financial Crisis Of2008, the low-cost development pattern of China’s manufacturing industry is facing unprecedented challenges, including:the loss of cost advantage under the background of rising labor cost, the decreasing of products’international competitiveness, the dilemma problems of structure upgrading and so on. Based on above background, the research goal of this paper is that manufacturing industry development needs to solve the complex connection between rising labor cost and structure upgrading, and that we should find out a way of manufacturing industry development under pressure of high labor cost, and at last realize the target of structure upgrading.First, based on analysis of current situation of our manufacturing industry labor cost, we find that: compared with the main competitors, our manufacturing industry has advantage in unit labor cost which comes from the improvement of labor productivity. We also find that labor cost and labor productivity display the same trend as proportion changing of capital-technology intensive industry in manufacturing industry.Second, we analyze the route of structure upgrading of manufacturing industry with the consideration of "Efficiency Wage" theory and "Smiling Curve" theory and sum up the mechanism of action as:Income Stimulation Mechanism, Cost Pushing Mechanism and Psychological Association Mechanism. We choose labor productivity standing for structure upgrading, and labor cost, technology, labor input, capital input as explanatory variables, and use the panel data of30provinces between2001and2010to establish a fixed effect regression model, and we come to a conclusion that labor cost, technology and capital input obviously promote structure upgrading. But to the opposite, labor input has a bad effect on it. By means of comparing three big economic regions, we get a knowledge of that structure upgrading of manufacturing industry is closely related to the labor cost. Low labor cost will result in low innovation in structure upgrading. And our manufacturing industry is now in "reasonable incentive" interval, thus rising labor cost will promote structure upgrading. And our labor cost is out of "excessive incentive", so in affordable cope, our labor cost has a large upside.Third, we choose semi-logarithmic model to analyze how labor cost has an impact on manufacturing industry structure upgrading. The result shows that rising labor costs will reduce the proportion of labor intensive manufacturing industry value in the whole manufacturing industry, while the percentage of capital and technology intensive industry output will increase, which means that the manufacturing industry structure’s upgrading.Finally, on the basis of empirical analysis, we propose the path of how to promote manufacturing industry structure upgrading. Based on view of labor cost, we give following suggestion. Improving the "Efficiency Wage " system and ensuring "win-win " between labor cost growing and the manufacturing industry structure’s upgrading. Improving the normal wage growth mechanism, and residents’ income should raise in pace with economic development and improve the mechanism of normal wage growth.