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China’s labour shortage: getting worse

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China’s labour shortage: getting worse

Considering the state of the world economy, a labour shortage is the last thing you’d expect Chinese factory owners to have to worry about.

But finding workers in southern China is worse than last year, according to an annual survey conducted by the Chinese Manufacturers’ Association of Hong Kong.

This is surprising given there are fewer orders to be filled. In the first three months of the year, 86 per cent of respondents saw orders fall or stay flat, compared with 72 per cent last year. After all, the lacklustre economies of the US and western Europe still account for most of their business.

At the same time, over 90 per cent are struggling to hire enough workers. On average, they are 14 per cent short of the number of staff they need, compared with 11 per cent last year.

One reason is the Guangdong government’s December decision to suspend a planned increase in the minimum wage. At the time, that decision was cheered by factory owners who were already struggling to cope with a 21.2 per cent rise in minimum wage imposed in 2010. The flip side is that even fewer migrant workers now feel it’s worth their while to work in the province, where the cost of living is among the highest in the country.

“My friends have built cinemas and bowling alleys in their factories to try and retain staff. They have raffles to lure back after the Chinese New Year holidays. But it’s been useless. The migrant workers still don’t want to stay,” said Irons Sze, president of the CMA and whose family owns a fibre manufacturing business.

For much of the last 30 years, young people with little education who wanted escape from the poverty and hardship of rural villages would flock to Guangdong province for some of the best-paying factory jobs in the country. But as China’s interior develops, many are finding work closer to home, such as the 20,000 workers employed by Sze at his factory in Jiangxi, located just north of Guangdong.

But for many small-to-medium factories, the cost of relocation is prohibitive and their future in Guangdong looks increasingly gloomy.

The only way out seems to be a move up the value chain. Having your own brands would bring better profit margins and better growth prospects, especially if they appeal to mainland Chinese consumers. More than half of the survey’s respondents are moving in that direction.

But Sze warns that the bureaucracy and taxes involved are altogether more complicated than a traditional contract manufacturer is used to. “That is why original equipment manufacturers have started switching to [manufacturing for other brands] in recent years. It’s not because they particularly want their own brands. It’s just that they don’t have a choice,” he said.

Source: http://blogs.ft.com/beyond-brics/2012/06/18/chinas-labour-shortage-getting-worse/#axzz1yOWGahqD


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