WSJ story on China union drive misses the point

TheStreet.com’s Marek Fuchs argued in his Friday column that a Wall Street Journal article on how the Chinese government was pressing for more unionization of workers missed an important point.

Fuchs wrote, “The unionization effort, we are told, is on track to get more than half of foreign companies to unionize by the end of the year.

“And the Journal, in dutiful business media mode, rounds up some surface quotes on whether this is good or not and whether it will happen or not. The kicker is more of a toe tap: A Wal-Mart spokesman is given space to say that the company respects its workers’ wishes.

“Aww. But nowhere, nowhere, in the article is the essential long-term point in play: The No. 1 long-term effect from this change might be wage inflation.

“That’s the deal, yo. Whether Chinese employees of foreign companies should be unionized isn’t the concern from a stockpicker’s perspective. And from a business journalist’s perspective, in this case you need to go further than will-they-or-won’t-they; this, right here, is potentially a major economic trend.

“Hear me out. Inflation has been kept in check, in large part, by cheaper foreign labor and the check that puts on wage rates in America.

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“If wages creep up in China as a result of unionization, profits will be hurt immediately — and wages and inflation will pick up here in the U.S., causing more grief.

“A journalist who touches on Chinese unionization without touching on American inflation going forward is doing investors no favor.”

Read more here.