China's Huge Labor Shortage begins

[kickok1975]

"Please come to my company, please!"

YIWU, China--China's teeming migrant masses are calling the shots these days. Millions of Chinese, battling inflation and soaring food costs, are job-hopping like never before. This is proving to be a major headache for manufacturers, especially in coastal regions like Zhejiang province, where this city is situated. A public job placement office here looked more like an auction house than a recruitment center on Monday following the end of the Chinese New Year holiday.

A woman, who had hoisted a cardboard sign that read 1,600 yuan (about 20,000 yen, or $240) for a monthly starting salary, scratched out the figure and replaced it with 1,700 yuan.
"We cannot attract anybody unless we raise salaries higher than last year's levels," said the woman, who was trying to recruit workers for a spinning factory.
Xu Shulong, a 30-year-old at the recruitment section of a manufacturer of shopping bags, acknowledged that competition to hire factory workers is growing more fierce.
"We cannot afford to be picky about people's educational backgrounds or job experience," Xu said. "We'll take anybody, as long as they are aged between 18 and 40."
Xu lamented that only 30 of about 80 workers at the factory who returned to their home have come back to work so far after the New Year holiday.
Yiwu is a major manufacturing base for a whole range of goods sold at Japan's 100-yen shops.
The situation unfolding here illustrates the escalating competition for factory workers in an increasingly tight labor market.
Living costs have soared since last autumn, prompting many Chinese workers to look for better-paying jobs.
The rapid economic development of inner regions created a new job market, which intensified competition for factory workers with coastal cities.
China's labor market is a seller's market--more so than last year, which was marked by a string of strikes by workers demanding higher pay.
Guangdong province in southern China close to Hong Kong is said to be short of 1 million laborers.
Hundreds of thousands of laborers are needed in each of many other coastal cities, according to some estimates.
The Chinese government, eager to avoid social unrest, is pushing to raise wages.
Emulating the path taken by Japan in the 1960s, China aims to double workers' salaries over the next five years or so.
The move is partly intended to transform China's export-led economy, shored up by cheap labor, into one spearheaded by domestic consumption with raised income.
According to the Chinese Ministry of Human Resources and Social Security, 30 of China's 31 provinces, directly controlled cities and autonomous regions raised minimum pay last year.
The average increase was 22.8 percent.
Many cities, including Shanghai, announced that they will raise wages by at least 10 percent again this year.
The working-age population--those aged 15 through 64--is expected to peak in 2015.
But the seller's market applies only to factory workers.
It is quite a different story with college graduates, who are struggling to land jobs.
This shows that China's economy has not yet evolved from a labor-intensive structure, according to economists.
Officials at the Shaoxing city government in Zhejiang province and recruiters of local companies wasted no time after the New Year holiday to secure a pool of migrant workers for the province.
On Feb. 9, the first day back to work, one group of officials and recruiters took off for Gansu province, about 2,000 kilometers to the west.
Another group headed for the Guangxi Zhuang Autonomous Region, which is close to the border with Vietnam.
Factories in coastal region are inundated with orders for products, buoyed by China's strong exports. But many fear they will miss delivery dates if they cannot acquire enough workers.
The groups of recruiters ventured further into China's vast interior to scout locations deemed underdeveloped or developing with a big reserve of potential workers.
According to Jinri Zaobao (Today's Morning Post) newspaper in Zhejiang province, companies in Gansu province are vying with more than 100 companies based in areas outside of Shanghai and elsewhere in search of workers.
The Shaoxing group's offer of 2,000-3,000 yuan a month, including overtime pay, didn't prove attractive.
The offer in part paled in comparison to a report on apple growers in the province raking in more than 50,000 yuan in annual income on the back of a steep rise in fruit prices in recent months.
At Fushikang, a manufacturer that rolls out products such as Apple Inc.'s iPhone and has 450,000 on the payroll in Shenzhen alone, laborers making 3,000 yuan a month as take home pay are not a rarity.
At the train station of Chongqing, one of four cities under the direct control of Beijing, representatives of three Taiwanese companies in the information technology industry were trying to recruit workers for their factories in the city earlier this month.
Jiang, a man in his 40s and who was on his way back to Zhejiang province to work, peppered one of the representatives with questions about the working conditions.
He said he sought the information for his 20-year-old unemployed daughter, Yan, who lives in Chongqing.
Jiang, who has spent more than two decades as a migrant worker, earns a monthly salary of 5,000 yuan at a shipyard.
He says his employer is so worried about labor shortage that he gave him round trip expenses for the first time to ensure that Jiang would return to work after the New Year break.
But Jiang said he wants his daughter to work in the city.
"Unlike before, people can now choose where they want to work," he said.
Yan agreed. "I want to stay here with my mother," she said.
The minimum wage in Chongqing is 870 yuan, double the figure of five years ago.
Still, it is about 20 percent less than what is the norm in coastal cities.
Even Fushikang's starting pay of 2,000 yuan, including overtime, is about 20 percent less than in its factories in coastal areas.
Ye, a 26-year-old who earns 2,500 yuan a month at a sweater factory in Guangzhou in Guangdong province, agreed to be interviewed by a company representative.
"It is acceptable," said Ye, who has spent 10 years working away from home, referring to the proposed salary offer.
"It's time I returned to my hometown," Ye said. "Prices are cheaper and I have my family and friends."

 

[kickok1975]

The shortage is spreading everywhere

GUANGZHOU, China — Just a year after laying off millions of factory workers, China is facing an increasingly acute labor shortage.
As American workers struggle with near double-digit unemployment, unskilled factory workers here in China's industrial heartland are being offered signing bonuses.
Factory wages have risen as much as 20 percent in recent months.
Telemarketers are turning away potential customers because recruiters have fully booked them to cold-call people and offer them jobs.
Some manufacturers, already weeks behind schedule because they can't find enough workers, are closing down production lines and considering raising prices. Such increases would most likely drive up the prices American consumers pay for all sorts of Chinese-made goods.
Rising wages could also lead to greater inflation in China. In the past, inflation has sown social unrest.
The immediate cause of the shortage is that millions of migrant workers who traveled home for the long lunar New Year earlier this month are not returning to the coast. Thanks to a half-trillion-dollar government stimulus program, jobs are being created in the interior.
But many economists say the recent global downturn also obscured a longer-term trend: China has drained its once vast reserves of unemployed workers in rural areas and is running out of fresh laborers for its factories.
Since China does not release reliable, timely statistics on employment, wages are considered the best barometer of labor shortages. And temp agencies here in Guangzhou raised their rate for factory workers this week to $1.17 an hour, from 95 cents an hour before the new year holiday.
The rate was 80 cents an hour two years ago, before the global financial crisis temporarily depressed wages and demand.
The dearth of returning migrants set off a desperate scramble this week to recruit the workers who did step off long-haul buses and trains returning from the interior.
At a government-run employment center in downtown Guangzhou, employers seeking workers outnumbered job-hunters Thursday afternoon.
Outside, Liang Huoqiao, a 22-year-old plastics worker, joined a small group of men and women studying a 40-foot-wide list of companies seeking workers.
"You can walk into any factory and get a job," he said.
The official China Daily newspaper said on Thursday that surveys of employers showed that one in 12 migrant workers was not expected to return here to Guangdong Province. Cities farther north along China's coast are also running low on labor; Wenzhou alone posted a shortage of up to one million workers.
Guangdong provincial officials announced on Wednesday that they were considering increasing the minimum wage, which varies by city and ranges from $113 to $146 a month.
Higher wages could ease labor shortages by prompting factories to reduce their work forces.
But many factories already pay well above the minimum wage. They are wary of further pay increases because it is not certain they can pass the increased costs on to their customers — in particular, strapped importers in the United States and the European Union.
Rising wages suggest the re-emergence of a worker shortage that was becoming evident before the financial crisis. A government survey three years ago of 2,749 villages in 17 provinces found that in 74 percent of them, there was no one left behind who was fit to go work in city factories — the labor pool was dry.
Mass layoffs in late 2008 and early 2009 because of the global financial crisis temporarily masked the developing shortage of industrial workers. But two powerful trends were still working to reduce the supply of young people headed for factories.
For one, the Chinese government has rapidly expanded postsecondary education. Universities and other institutions of higher learning enrolled 6.4 million new students last year, compared to 5.7 million in 2007 and just 2.2 million in 2000.
At the same time, China's birth rate has been sliding steadily ever since the introduction of the "one child" policy in 1977.
Labor shortages have returned quickly in recent weeks as these long-term trends have collided with a recovery in overseas demand for Chinese goods.
Far more jobs are available these days in China's interior. Government projects like rail and highway construction have absorbed millions of workers, particularly after Beijing allocated nearly $600 billion to economic stimulus spending in 2009 and 2010. Consumer spending is also rising briskly; auto sales more than doubled last month from a year before, and this has created many jobs in retailing, restaurants, hotels and other inland businesses.
Even before the holiday, companies were struggling to find the employees needed to keep assembly lines running.
At many factories, white-collar managers and engineers were forced to spend time on assembly lines to meet deadlines before the lunar New Year, because laborers were in such short supply. The managers often struggled with the tedious but intricate tasks required to make everything from toys to DVD players
"People working in the office, like me, have been asked to help on the factory floor," said Sky Niu, the sales manager at the Hengjia Electronics Company in Dongguan. "Of course, we can only help on the simpler tasks, such as packing."
The labor shortage is not benefiting workers just through higher wages. Personnel managers here say they are also abandoning the informal tradition of not hiring anyone over 35 — they say they are now hiring workers up to 40 years old, and sometimes older, despite concerns about whether they can keep up week after week with the rapid pace of Chinese assembly lines.
It remains to be seen if Chinese factories will learn from their hiring difficulties now and be less quick to lay off workers during the next global downturn.
The current system "is not stable, it's not healthy," said Han Dongfang, the director of the China Labor Bulletin, a Hong Kong-based group that advocates collective bargaining.
Though the wage boost increases the prospect of inflation, it may have another more salutary aspect. The Obama administration has been pushing China to let the renminbi rise against the dollar, which would erode some of China's formidable advantage in export markets. Rising wages in China have the same effect — while also giving Chinese families more spending power.
Letting wages rise benefits workers, said Jing Ulrich, the chairwoman of China equities and commodities at J. P. Morgan. Letting the currency rise benefits currency speculators, she said.
Mr. Liang, the 22-year-old plastics worker, said that he expected his pay to double in the next five years and added that he already had set his priorities.
"For sure, I want to buy a car," he said. "Car first, then maybe marriage later."

 

[kickok1975]

It seems China is reaching the historical turning point of wages, labor and economy. It will have a profound impact on Chinese life.

Investors fear that inflated migrant wage rates may weaken the comparative advantage of China's labour-intensive industries and thus harm their commodities' competitiveness.

Why are migrant worker wages increasing?
A younger overall demographic, stronger trade union involvement and the gradual approach towards the Lewis turning point in economic development (when abundant low cost supplies of labour begin to run out) have all contributed to wage rises in China. These factors also indicate that wage rises are likely to continue and most likely to speed up in the near future.

In addition, migrant demographic characteristics are changing. New migrant workers are not only younger, but also tend to work fewer hours than their predecessors did. The results from the China Urban Labour Survey (CULS) shows that, if measured by hourly wage rate, the growth of migrants' wages and their convergence to urban locals implies a larger surge in the actual wage rate.

The increase in the wage rate has been the highest in the eastern regions. With investments flowing in from coastal regions, employment opportunities have grown in the central regions and thus had faster growth of wages than in eastern regions. Due to their faster and more capital-intensive growth, the migrants' wage rates in the western regions have increased faster, compared with both the eastern and central regions.

There are three reasons why investors should worry less about rising wages.

First, the more rapid growth of labour productivity guarantees that the wage inflation will do no harm to the comparative advantage of manufacturing. Nationwide data from manufacturing firms shows that while workers' compensation in real terms increased by 91.8 per cent between 2000–2007, marginal product of labour increased by 178.7 per cent. It is clear that not wages alone but the ratio of wages-to-labour productivity determine the competitiveness of a firm, sector or country.

Secondly, China's spatial and regional diversity will allow central and western provinces to carry on labour-intensive industries, which have become outdated in the coastal regions. China can avoid the common flying geese pattern of labour-intensive industries' moving costs to less-advanced countries, following a wage increase, by allowing labour-intensive industries to continue growing in the less-developed inland regions. China's capacity for industrial development in the central and western regions has substantially improved as the result of the central government's implementation of the 'going-to-the-west' strategy.

Thirdly, the wage increase and its continuation will create a new group of consumers in China, which in turn can help rebalance the Chinese economy (as well as the world economy) and sustain its growth. There were 145 million recorded Chinese migrant workers in 2009, accounting for more than one-third of urban employment. Although the level of migrant workers' wage rates are below the average in the urban labour market, the huge size of migrant workers makes their total earnings and potential consumption expenditure significant. Being at the bottom of income distribution, an increase in migrants' income implies a reduction of inequality. Hence, as can be generally expected, this low income group has a higher consumption elasticity of income — namely, a stronger marginal propensity to consume.

Migrants are more likely to become the next big consumers in China. That will support China's transformation from export-led to domestic demand-driven growth and hopefully ease some investors' fears about labour wage increases.

 

[badguy2000]

CHina is quite short of blue-collar labour indeed.

but the white-collar labour is still more than jobs provided.
fact is that peasant workers are easy to find jobs while millions of university graduates are struggling for jobs.

 

[badguy2000]

well ,now the average monthly salary of blue-collar jobs here has risen to 2000-3000RMB(250-450USD or 14K-2.1K Rupees)such as dockers,babysitters,houdhold workers.

 

[niharjhatn]

I don't think its such a bad thing. In China and India, manpower was always a given, and not really respected as there were so many people available for work. Shortages, although slowing down economic growth, is often a turning point for those in the worker classes of these nations. Of course, the biggest issue with China is how this will impact on the cheaper (as in price!) goods that China produces - how much will this drive prices up?

 

[Ray]

If there is a major shortage of workers, then why are there the Chinese workers working overseas?

By working overseas, they are away from their families and face other hardships, say in Africa.

is the pay more attractive than what they would get in China itself?

Second question - Do the migrant workers from rural areas bring their family to the place where they are employed? Are they allowed to do so and is it permitted by the Hukou system?

Are the workers work under the Danwei system, where their needs are looked after by the employer?

 

[badguy2000]

If there is a major shortage of workers, then why are there the Chinese workers working overseas?

By working overseas, they are away from their families and face other hardships, say in Africa.

is the pay more attractive than what they would get in China itself?

Second question - Do the migrant workers from rural areas bring their family to the place where they are employed? Are they allowed to do so and is it permitted by the Hukou system?

Are the workers work under the Danwei system, where their needs are looked after by the employer?

1.the simple reason is that the monthly salary for oversea Chines workers is over 5000 RMB( about 800USD)at least,which is 2-3 times of the avearge one in CHina(250-450 USD).


2. the restriction is Hukou is not "legal restriction",but a "glass restriction".
If you have no the Hukou of the city where you work for, it doesn't mean that the government will forbid you and your familiies live/work in the city.
it just means that the city doesn't provide free eduction ,cheap medical care ,pension and other social welfare to you and your families. that is ,the life cost of you in the city will increae much .

 

[Ray]

1.the simple reason is that the monthly salary for oversea Chines workers is over 5000 RMB( about 800USD),which is 2-3 times of the avearge one in CHina(250-450 USD).

2. the restriction is Hukou is not "legal restriction",but a "glass restriction".
If you have no the Hukou of the city where you work for, it doesn't mean that the government will forbid you and your familiies live/work in the city.
it just means that the city doesn't provide free eduction ,cheap medical care ,pension and other social welfare to you and your families. that is ,the life cost of you in the city will increae much .

I know about the hukou system.

I wanted to know can a person sustain his family if he takes them along to his city of work?

Each danwei creates their own housing, child care, schools, clinics, shops, services, post offices, etc. Therefore, will the Danwei not ensure that the worker's family is also looked after i.e. medically, child care and education in particular?

 

[badguy2000]

I know about the hukou system.

I wanted to know can a person sustain his family if he takes them along to his city of work?

Each danwei creates their own housing, child care, schools, clinics, shops, services, post offices, etc. Therefore, will the Danwei not ensure that the worker's family is also looked after i.e. medically, child care and education in particular?

what you know about Hukou is outdated.

China was a society based "Danwei" system,but is not for a long time. "Danwei system" collapsed soon after 1992.

now "housing, child care, schools, clinics, shops, services, post offices, etc" are not provided by "Danwei" any more,but by public units.

 

[Blackwater]

Well, call your brothers from another mother ie. pakistani. They got huge population with no work. Hope they fill the GAP

 

[amoy]

As a cliche goes "right person for the right position". Those overseas posts demand different competency and readiness to endure foreign hardship for that seemingly higher income. Also in coastal areas people have relatively more access to foreign job info. Perhaps it explains why many youngsters in my home province esp. from countryside try every way to work abroard (legally or illegally) (even in "dangerous" Israel) while still many migrants flood from inland provinces to mine as driven by regional disparity.

As for wage hike, for example, a full-time maid was at Y1800/month back at home, but up to date no replacement has been found after Chinese New Year. In the city where I'm now, it's said even higher at Y2500 now for a full-time one.

Gone were the days "Danwei" provides everything from cradle to tomb. That's why a tightly woven social security net is imperative. Danwei (state-owned enterprises) once provided almost everything for employees. That benevolent "Socialism" gradually got malfunctioned or inefficient as being overburdened. Besides at that time (or even now) the masses that weren't taken care of by Danwei (state-run entriprises or govnmt) were greatly disadvantaged.

Clearly that 'shortage' in "blue" collar (but a temporary phenomenon?) is largely driven by export oriented industries in mainly coastal areas. But what if foreign demands evaporate or reduce?

Besides high unemployment rate for college graduates remains a headache that CCP can't escape from since "stability" is a top priority for its governance.

 

[badguy2000]

As a cliche goes "right person for the right position". Those overseas posts demand different competency and readiness to endure foreign hardship for that seemingly higher income. Also in coastal areas people have relatively more access to foreign job info. Perhaps it explains why many youngsters in my home province esp. from countryside try every way to work abroard (legally or illegally) (even in "dangerous" Israel) while still many migrants flood from inland provinces to mine as driven by regional disparity.

As for wage hike, for example, a full-time maid was at Y1800/month back at home, but up to date no replacement has been found after Chinese New Year. In the city where I'm now, it's said even higher at Y2500 now for a full-time one.

Gone were the days "Danwei" provides everything from cradle to tomb. That's why a tightly woven social security net is imperative. Danwei (state-owned enterprises) once provided almost everything for employees. That benevolent "Socialism" gradually got malfunctioned or inefficient as being overburdened. Besides at that time (or even now) the masses that weren't taken care of by Danwei (state-run entriprises or govnmt) were greatly disadvantaged.

Clearly that 'shortage' in "blue" collar (but a temporary phenomenon?) is largely driven by export oriented industries in mainly coastal areas. But what if foreign demands evaporate or reduce?

Besides high unemployment rate for college graduates remains a headache that CCP can't escape from since "stability" is a top priority for its governance.

college graduates are not the most embarrassed class in CHina now.
it is much harder for them to find one proper job than peasant workers and other blue-collar workers.

 

[kickok1975]

Many college graduates couldn't find job because Chinese private business is not strong enough. Joining big state company and government is currently considered as privilege. Private section is oppressed and squeezed by big monster state companies that monopoly national resources and always got favorable treatment from state bank and local government. That's why we never see any private company can grow as big as China mobile, China oil etc. And we all know how corrupt and incompetent these state companies are.

CCP understand private section could hire more people and help them stabilize the country. They will take advantage of it but don't want it to grow too strong to challenge their regime. So on one hand they encourage small business but on the other hand they arrest, demonize some big and rich private business owners to ensure this section of business is under their tight watch.

That's the problem for China. A political system that is increasingly becomes obstacle of economic development.

 

[badguy2000]

Many college graduates couldn't find job because Chinese private business is not strong enough and join big state company and government is considered as privilege. They are oppressed and squeezed by big monster state companies that monopoly national resources and always got favorable treatment from state bank and local government. That's why we never see any private company can grow as big as China mobile, China oil etc. And we all know how corrupt and incompetent state companies are.

CCP understand private section could hire more people and help them stabilize the country. They will take advantage of it but don't want it to grow too strong to challenge their regime. So on one hand they encourage small business but on the other hand they arrest, demonize some big and rich private business owners to ensure this section of business is under their tight watch.

That's the problem for China. A political system that is increasingly becomes obstacle of economic development.

here obviously you in fact want to persuade people here:

1. Chinese state-owned enterprises are satan . they grow rapidly just because they suck the blood of commom people.

2. Chinese private enterprise are angels.

3. Chinese Common can hardly have chance to get one jobs of state-owned enterprises or CHinese government


what you said is a typical stereotypes viewpoint of Chinese rightwing....
you always simplify whatever CCP do to some conspiracy ......just for your naive "democracy ideolgy"

if you were the head of CCP, then you would just be another Gorbachev and CHina would the the next USSR.

 

[kickok1975]

I once worked in such big state monster company and I know how they are running. I also have relative still working there and have first hand information. Their astounding performance is not a result of good management, but rather getting the low hanging fruit from monopoly. The head positions of those companies are enviable job that they can manipulate billions of money without answering to stake holder: Chinese people

These companies are most powerful tools for CCP government to control economy. People like Badguy is lucky to work there but the chance is probably 1:1000 for newly graduate to get such job. Where should they go then?

 

[kickok1975]

Today's Russian people are living better life than Soviet era, even though they are no longer so called "super power". Ask majority of Russian and majority Chinese people if they want to go back to Soviet or Mao's time respectively. You will get answer. It's understandable you defend the place where the mouth is feeding. But million of Chinese don't have your privilege and I would rather find out how it could be corrected.

 

[p2prada]

1. Chinese state-owned enterprises are satan . they grow rapidly just because they suck the blood of commom people.

2. Chinese private enterprise are angels.

What you pointed out is true with India too. The State owned enterprises monopolize critical industries. Indian Private enterprises are better managed with better pay.

 

[hbogyt]

Public Enterprises

Today's Russian people are living better life than Soviet era, even though they are no longer so called "super power". Ask majority of Russian and majority Chinese people if they want to go back to Soviet or Mao's time respectively. You will get answer. It's understandable you defend the place where the mouth is feeding. But million of Chinese don't have your privilege and I would rather find out how it could be corrected.

Only some Russians are better off now than they were in the Soviet era, but some are not, and that is with 20 years of economic growth. Does the total utility of the Russian people today exceeds that had the reform been more gradual, or not happened? Hard to tell.

I am sure that there are Russians who are willing to return to the Soviet days, but no Chinese the Mao times. The USSR was a developed nation with material comfort for all. Mao's China was not.

Public enterprises can be just as efficient of private enterprises. Reformed public enterprises can be just as virtuous as you think private enterprises are. There are also certain advantages to large public enterprises, in the long-term. Their sometimes non-profit seeking motives can prove to be valuable for economic development.

What would happen if one big state enterprise in a sector is replaced by one big private enterprise, or several small private enterprise? Which by the way is highly unlikely because the state is still clinging onto their communist ideals, for that 'one day'. Despite rightist persuasion, I can not say for sure if it will have a more desirable outcome overall than present. This is the wisdom in the Chinese reform that everything is undertaken at such speed as to be reversible.

 

[badguy2000]

I once worked in such big state monster company and I know how they are running. I also have relative still working there and have first hand information. Their astounding performance is not a result of good management, but rather getting the low hanging fruit from monopoly. The head positions of those companies are enviable job that they can manipulate billions of money without answering to stake holder: Chinese people

These companies are most powerful tools for CCP government to control economy. People like Badguy is lucky to work there but the chance is probably 1:1000 for newly graduate to get such job. Where should they go then?

I once worked for ICBC, the global biggest bank tycoon now. I myself experienced its torturous "transforming" from a inefficient bureaucratic apparatus to global most profitibal bank.

In fact, It was just because ICBC's "transform" was tooo torturous that I quit ICBC several years ago .

I know that chinese state-owned enterprises are not perfect,but still better than wall street fat cats.