China has reached the Lewis turning point

In the past several years, labor shortage in China has become an emerging issue. However, there is heated debate on whether China has passed the Lewis turning point and entered a new era of labor shortage from a period of unlimited labor supply. Most empirical studies on this topic focus on the estimation of total labor supply and demand. Yet the poor quality of labor statistics leaves the debate open. In this paper, China's position along the Lewis continuum is examined though primary surveys of wage rates, a more reliable statistic than employment data. Our results show a clear rising trend of real wages rate since 2003. The acceleration of real wages even in slack seasons indicates that the era of surplus labor is over. This finding has important policy implications for China's future development model.

► This paper examines the Lewis turning point using primary village surveys over different periods. ► Rural wage has accelerated since 2003 in both harvest and slack seasons. ► Male and female wages have experienced the same trend - slow growth prior to 2003 and a rapid increase since 2003. ► The era of surplus labor is over.