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Economist: Cities Need Low-Skilled Labor

Population controls are keeping labor out of Chinese cities and causing prices to rise.

By Han Bingbin Updated May.18

Big cities in China are running short of low-skilled labor due to government efforts to control the urban population, thus causing both costs and prices to rise, according to Lu Ming, professor of economics at Shanghai Jiaotong University. His comments were reported on Sike.com, an opinion site run by the Xinhua News Agency.  

Lu said there is a common misconception that metropolitan cities don’t need low-skilled laborers. But the gathering of highly-skilled labor creates a huge demand for city services that require much lower skills from the providers, Lu said.  

In the US, Lu said, to attract one person in high-tech would normally require a city to have at least one doctor, one lawyer and three low-skilled laborers such as waiter and babysitter. What Chinese big cities need for the time being is not high-skilled personnel but the exact opposite, Lu said, adding that the discrepancy is already causing service prices such as babysitting to exceed the average salary of people with master’s degrees.  

To control population size, Lu noted, the government should adopt a market scheme, such as charging congestion fees and taxing license plate holders, rather than targeting specific groups  in a discriminatory manner. While a city gathers residents of different payment levels, he said, it must ensure public services favor low-income earners. 

The market can solve most of China's urban problems, such as congestion, Lu said. It means the government should start with the supply side and get ready to increase supply and investment when the market demonstrates demand, he said.  

For instance, he said, local governments tend to sell land to commercial rather than residential real estate developers in an attempt to increase tax earnings. This has caused residential house prices to rise. Therefore, Lu said, the solution to China’s housing price hike primarily requires land transfer to follow market needs.