That pressure on employers is in addition to the decline in working age population and the reluctance of rural central Chinese residents to move to cities on the coast in search of jobs because they think they have better options closer to home.
Those are among the challenges facing companies operating in China as the 'socialist market economy' enters its 37th year. The first and second generations to enjoy China's economic resurgence are no longer content to accept and hold any job proffered to them. They want improved working conditions and a better quality of life. The minimum wage is no longer an issue for most. As the following article explains, they already know they can secure higher compensation by shopping around.
The challenge for employers is that the the products they make - and the western companies to whom they subcontract - still demand the lowest possible costs. They will take their business elsewhere in China or to Sri Lanka, Bangladesh, even Africa, in search of alternatives if they are dissatisfied with the prices they are being quoted. So employers are attempting to keep workers satisfied by offering better housing, fewer hours and other emoluments that eat into their margins rather than raise prices in order to stave off both the loss of production capability - and a reduction in orders.
The question is whether the Chinese companies affected are making adequate strides to improve the quality and innovativeness of their output, the factors that may differentiate them sufficiently to win business once their low cost advantage disappears. Acquiring the technology to close that gap is what much of the industrial espionage now know as cybertheft is intended to provide. Western companies are starting to pull some production back to their home territories spurred by an evening out of costs globally, fears of intellectual property theft and concerns about becoming too dependent on China as a source of value within their supply chain.
Anyone who thinks China's economic hegemony is over will be in for a most unpleasant surprise, but there are inflection points at which advantage may now be gained and labor costs are their leading indicator. JL
Rahul Jacob reports in the Financial Times:
China’s working age population, defined as being between 15 and 59, fell by 3.5m last year to 937m, a result of the one-child policy of the past three decades.
As the number of available workers falls, factories struggle not only to find new hires, but also retain existing staff.
Outside a factory in Dongguan, a city in China’s manufacturing heartlands, school buses drop off children whose parents work at the Maisto toy factory, which manufactures Bburago collectable cars and radio-controlled vehicles.
About 120 children live in dormitories on the factory site. About 40 per cent of Maisto’s 3,000 workers now live with partners and children and some of the dormitories, designed for young single workers are being revamped to make them more suitable for families.
If the toy factory is to retain workers in China’s new era of persistent labour shortages then this kind of investment is necessary, says manager Michael Liu. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/b56ab068-8954-11e2-ad3f-00144feabdc0.html#ixzz2O6Lpci1x
A young and educated workforce demands more from employers. In this context, working conditions matter as much as salary.
“We want to give them a sense of belonging and the feeling of being respected,” says Mr Liu, referring to the company’s efforts that range from better housing for employees to soliciting suggestions from them in the factory.
The past few weeks have made clear how severe the hiring crisis is. The weeks after the lunar new year holidays, which ended in late February this year, are typically peak recruiting season for Chinese workers.
But it has been difficult for many smaller employers in Dongguan, a string of satellite cities where factories predominate rather than housing or office towers. Some are struggling to recruit as many as half of the new workers they need, says Willy Lin, who owns a sweater factory in Dongguan.
In this environment the minimum wage – set to rise to Rmb1,310 ($211) in May in Dongguan – means little. Already many employers pay much more than the statutory requirement.
“Workers don’t care what the minimum wage is. They expect to be compensated at the market rate,” says Mr Lin. “Given the massive shortages [of labour] we are facing, I am not sure any method will work any more.”
David Liu, who owns a handbag maker in Dongguan, offers up to Rmb2,000 per month for new employees and Rmb3,000 for those with a year of experience. So far, he has only managed to hire 40 per cent of the workers he needs.
Workers’ confidence that they can get a new job means that many take longer breaks over the lunar new year.
“Nowadays, workers think differently,” Mr Liu says. “They want a one to two-month break before looking for a new job after the new year.”
The Guangdong government on Monday said the province has a shortage of half a million workers after the lunar new year.
Such is the shortage of staff that when Jane Cheng attended a wedding at a three-star hotel recently, the security guards doubled as waiters. A new generation of better educated workers demands respect, said Ms Cheng, the human resources manager at TTI, which makes lawnmowers and power tools. It employs 9,000 people in Dongguan. It is not usual now for workers to turn down jobs they see as being too taxing.
“We have had applicants who say. ‘You require workers to stand and work all day. I need a place to work where I can sit,’” she says with a laugh.
A better educated workforce may be more demanding, but their education could also foster greater productivity. Arthur Kroeber, who heads research firm Gavekal Dragonomics in Beijing, says China is better placed than its competitors such as India to raise the productivity of its workers because they are far better educated.
Retaining workers is a step towards better productivity, especially in Dongguan where as many as 10 per cent of workers quit their jobs every month
So far, Maisto’s strategy has helped it retain and recruit staff, Mr Liu said. This year, it recruited as many as 50 workers a day after the new year hiring period. This compares with just 10 a day last year.
And Maisto’s plans don’t stop with dormitories. The company plans to introduce a pension system for workers who stay with the company into their 30s and 40s. The family dormitories have prompted workers to recommend the factory to job-seekers. In today’s Dongguan, employers need all the good references they can get.
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