Rural Wages Vs. Urban Pay: Time For Dorothy To Head Back To Kansas?


When I was in college there was a popular t-shirt that read: “Dear Aunt Em, Hate you, hate Kansas, taking the dog. Love, Dorothy.

The obvious reference to Wizard of Oz aside, it captured the sense of adventure people feel as they leave boring, ho-hum lives in rural or suburban areas to seek their fame and fortune.

It makes sense that college kids were drawn to the sentiment, but I imagine it would resonate much more with the sort of young adults who, like Dorothy, grew up on a farm.

Especially in emerging nations.

This is the breeding ground of the manufacturing class of the world — the same kids who probably made said t-shirt.

The allure of the city leads the peasant farmers of today to become the factory workers of tomorrow.

That, in turn, drives a manufacturing boom, and as more of them search for jobs, labor costs remain low and products remain cheap. It’s why those college kids in the U.S. can buy electronic gadgets, clothes, and other consumer goods at such low prices.

But it doesn’t last forever. Eventually everyone figures out that the yellow brick road doesn’t lead to a pot of gold.

As rural wages move up to compete with urban pay, and the cost of city living shoots higher, the draw of factory work fades, the migration wave subsides, and productivity gains slow to a crawl.

It hurts the companies, too. As factory workers demand more pay, they drive up costs and cut into profits. At this point, the economic gains of getting those people to migrate to cities are mostly null.

It’s exactly what we’re seeing in China.

As Chinese leaders struggle to create growth, keep the property bubble intact, and maintain order in a population unhappy with work conditions and pay, I’d imagine they long for the days when more peasant farmers were available for factory work.

Even with roughly 278 million such workers punching the clock every day, it’s not enough… and there aren’t any more workers to be had.

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