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Chinese labour shortage drives up wages
Published: 4 March 2010 11:59 | Changed: 4 March 2010 16:37
By Oscar Garschagen in Shenzhen
It didn’t take Zhang Qin (22) long to find himself a job after his 18-hour train ride to the southern Chinese city of Shenzhen. “I suspected it would be no problem at al,” he said. “I read on the internet you could just walk into any factory here and get a job.”
As he stepped into a recruiter’s bus, he called his parents to share the good news. He would be putting together plasma display panels for electronics manufacturer Samsung. But if he didn’t like this work, he said, he would try his luck at competitors LG, Panasonic or Galanz the same month. These options are available because all large factories in the Pearl and Yangtze river delta are currently experiencing a sudden and unexpected labour shortage.
Millions of migrant workers formerly employed on China’s eastern coast have not returned from their annual trek back to their native homes. As they do every year, they travelled home to celebrate the Chinese New Year and Lantern Festival. But instead of returning east, they have found new jobs in China’s central and western provinces.
Since Chinese employment data are notoriously unreliable and always outdated, no reliable numbers are available concerning the labour shortage. “But if businesses like Samsung, Panasonic and even factories in Hong Kong and Taiwan are raising wages by 10 to 30 percent, you know something big is taking place,” said economic analyst Andy Xie. “Those pay rises are a better indicator than official statistics.”
Zhang Qin, an educated but inexperienced electrician from a village in Sichuan, will be earning 1,800 yuan (179 euros) a month working for Samsung. His benefits include a place to stay, three meals a day and free internet. He can earn more for overtime worked on the one day he gets off each week.
Raises all around
Quanta Computer in Shenzhen recently raised the wages of all its 40,000 employees by ten percent, and is also considering a new bonus system. Xie, a former analyst for Morgan Stanley, called this move illustrative of recent developments. Quanta, a Taiwanese company, is one of the biggest manufacturers of laptops in the world. It counts Apple, Dell, HP and Acer among its clients.
Factories producing new iPads, iPhones, Volkswagens, Buicks, Jeeps and BMWs have raised pay by 20 percent on average. “A labour shortage hurting all branches of industry, including hospitality, is an entirely new phenomenon in China: the situation is nothing short of alarming,” said Xie, who works as an analyst for the financial weekly Cajing and several Chinese television networks.
The difference with the situation on the labour market a year ago could not be stronger. After recession struck in the western world, close to 20 million of the 150 million Chinese migrant workers lost their jobs. There was only one job opening available for every four people looking for work.
Tried every incentive
The situation has quickly reversed: today every job-seeker has four openings to choose from. Large signs with thousands of openings line the windows of Golden Future employment agency in Shenzhen.
Yet on the morning after the Lantern Festival the office was quiet. Director Wang Lu said she had sent her employees to bus and train stations to offer jobs to freshly arrived migrant workers. Other agencies had even sent recruiters out into the provinces.
Tommy Lam Chin, the owner of a chain of textile and toy factories, said he had never been in this situation. Sitting in his Shenzhen office, he explained that while foreign orders had been recovering in recent months, he remained 3,000 workers short of the 8,000 people he needed. “This is the first time I am unable to fill all orders, and am forced to postpone delivery dates past the clients’ wishes,” he said.
Lam Chin’s factories produce high quality sporting gear and expensive blazers for the American market. Like the competition, he has tried every incentive to entice his employees to return: higher wages, bonuses, improved working and living conditions, free internet and movies. Some factories have even paid train and airfare for their workers.
Their own fault?
Factory owners like Lam Chin hope the labour shortage will prove temporary and that new generations of migrant workers will flock to their factories in May and June when high schools close their doors. But they could be mistaken.
A Chinese periodical, the Southern Metropolis Weekly, concluded this would only happen “if businessmen really start improving working conditions”.
The magazine wrote that China’s entrepreneurs “largely have themselves to blame for this problem”, lambasting the companies that provide cheap products to European and American consumers. “They never gave people the respect they deserved. Working and living conditions were appalling and wages were low. Anybody who treats his workers this way should not expect any loyalty. Companies have their own lack of vision to thank for this crisis.”
Two other factors are also involved. The rapid industrialisation and urbanisation of central and western China has created a demand for labour in the native provinces of many migrant workers. Wages here are mostly lower than they are on the east coast, but so is the cost of living, and migrants’ families live nearby. Educational policy is also causing the pool of uneducated labourers to dwindle. Children of labour migrants are attending universities and professional colleges in increasing numbers.
Workers grow richer
Macro-economic consequences of the labour shortage in China’s core industrial regions are not hard to predict, Xie said. “Wages are up, so prices will go up too. Inflation will also rise more quickly than the three to five percent currently predicted. Factories producing for export will try to pass some of their rising costs on to consumers in the US and Europe. But they should be careful. Competition is cutthroat and the economic recovery weak.” Current developments are good news for many Chinese labourers, however. Their purchasing power will improve as a result.
In any case, China will become less attractive a country for businesses requiring cheap labour. The rising wages and technological developments will hurt China’s competitive advantage. “This process has been underway for quite some time already. It is an inevitable and welcome development,” Xie said.
Published: 4 March 2010 11:59 | Changed: 4 March 2010 16:37
By Oscar Garschagen in Shenzhen
It didn’t take Zhang Qin (22) long to find himself a job after his 18-hour train ride to the southern Chinese city of Shenzhen. “I suspected it would be no problem at al,” he said. “I read on the internet you could just walk into any factory here and get a job.”
As he stepped into a recruiter’s bus, he called his parents to share the good news. He would be putting together plasma display panels for electronics manufacturer Samsung. But if he didn’t like this work, he said, he would try his luck at competitors LG, Panasonic or Galanz the same month. These options are available because all large factories in the Pearl and Yangtze river delta are currently experiencing a sudden and unexpected labour shortage.
Millions of migrant workers formerly employed on China’s eastern coast have not returned from their annual trek back to their native homes. As they do every year, they travelled home to celebrate the Chinese New Year and Lantern Festival. But instead of returning east, they have found new jobs in China’s central and western provinces.
Since Chinese employment data are notoriously unreliable and always outdated, no reliable numbers are available concerning the labour shortage. “But if businesses like Samsung, Panasonic and even factories in Hong Kong and Taiwan are raising wages by 10 to 30 percent, you know something big is taking place,” said economic analyst Andy Xie. “Those pay rises are a better indicator than official statistics.”
Zhang Qin, an educated but inexperienced electrician from a village in Sichuan, will be earning 1,800 yuan (179 euros) a month working for Samsung. His benefits include a place to stay, three meals a day and free internet. He can earn more for overtime worked on the one day he gets off each week.
Raises all around
Quanta Computer in Shenzhen recently raised the wages of all its 40,000 employees by ten percent, and is also considering a new bonus system. Xie, a former analyst for Morgan Stanley, called this move illustrative of recent developments. Quanta, a Taiwanese company, is one of the biggest manufacturers of laptops in the world. It counts Apple, Dell, HP and Acer among its clients.
Factories producing new iPads, iPhones, Volkswagens, Buicks, Jeeps and BMWs have raised pay by 20 percent on average. “A labour shortage hurting all branches of industry, including hospitality, is an entirely new phenomenon in China: the situation is nothing short of alarming,” said Xie, who works as an analyst for the financial weekly Cajing and several Chinese television networks.
The difference with the situation on the labour market a year ago could not be stronger. After recession struck in the western world, close to 20 million of the 150 million Chinese migrant workers lost their jobs. There was only one job opening available for every four people looking for work.
Tried every incentive
The situation has quickly reversed: today every job-seeker has four openings to choose from. Large signs with thousands of openings line the windows of Golden Future employment agency in Shenzhen.
Yet on the morning after the Lantern Festival the office was quiet. Director Wang Lu said she had sent her employees to bus and train stations to offer jobs to freshly arrived migrant workers. Other agencies had even sent recruiters out into the provinces.
Tommy Lam Chin, the owner of a chain of textile and toy factories, said he had never been in this situation. Sitting in his Shenzhen office, he explained that while foreign orders had been recovering in recent months, he remained 3,000 workers short of the 8,000 people he needed. “This is the first time I am unable to fill all orders, and am forced to postpone delivery dates past the clients’ wishes,” he said.
Lam Chin’s factories produce high quality sporting gear and expensive blazers for the American market. Like the competition, he has tried every incentive to entice his employees to return: higher wages, bonuses, improved working and living conditions, free internet and movies. Some factories have even paid train and airfare for their workers.
Their own fault?
Factory owners like Lam Chin hope the labour shortage will prove temporary and that new generations of migrant workers will flock to their factories in May and June when high schools close their doors. But they could be mistaken.
A Chinese periodical, the Southern Metropolis Weekly, concluded this would only happen “if businessmen really start improving working conditions”.
The magazine wrote that China’s entrepreneurs “largely have themselves to blame for this problem”, lambasting the companies that provide cheap products to European and American consumers. “They never gave people the respect they deserved. Working and living conditions were appalling and wages were low. Anybody who treats his workers this way should not expect any loyalty. Companies have their own lack of vision to thank for this crisis.”
Two other factors are also involved. The rapid industrialisation and urbanisation of central and western China has created a demand for labour in the native provinces of many migrant workers. Wages here are mostly lower than they are on the east coast, but so is the cost of living, and migrants’ families live nearby. Educational policy is also causing the pool of uneducated labourers to dwindle. Children of labour migrants are attending universities and professional colleges in increasing numbers.
Workers grow richer
Macro-economic consequences of the labour shortage in China’s core industrial regions are not hard to predict, Xie said. “Wages are up, so prices will go up too. Inflation will also rise more quickly than the three to five percent currently predicted. Factories producing for export will try to pass some of their rising costs on to consumers in the US and Europe. But they should be careful. Competition is cutthroat and the economic recovery weak.” Current developments are good news for many Chinese labourers, however. Their purchasing power will improve as a result.
In any case, China will become less attractive a country for businesses requiring cheap labour. The rising wages and technological developments will hurt China’s competitive advantage. “This process has been underway for quite some time already. It is an inevitable and welcome development,” Xie said.