The rise of labor cost and the fall of labor input: Has China reached Lewis turning point?

Abstract

With the emergence and expansion of a shortage of migrant workers, there is much debate over whether China has reached Lewis turning point (LTP). This paper uses China's national farm product cost-benefit survey data to analyze changes of labor cost, labor input, capital input and marginal labor productivity in the agricultural sector. This paper finds that rapid rise of labor cost has happened in the agricultural sector since 2004, accompanied by rapid and significant wage increases for unskilled workers. Total labor input and labor input per unit of three major grain crops have been falling and capital-labor ratio has risen rapidly since the mid-1990s. Output elasticity of labor and marginal labor productivity of japonica rice has risen by a large extent between the period 1980–2004 and 2005–2008. The evidence provided in this paper can help people clarify the debate on whether China has reached LTP.