Thursday, 22 June 2017

China's Cheap Labour No More

There are still armies of factory workers -- but they want better pay to stay
On my first day at work in Beijing at a state media company in 2007, my new boss took me out to lunch and I remember him saying the supply of migrant workers was "limitless".

He believed (or wanted me to believe) there was an endless supply of cheap labour for factories.

I was very skeptical -- eventually the country would run out of migrant workers because everyone had one-child families save for ethnic minorities.

Ten years later I wish I could go back to him and say, "Remember you told me the supply of factory workers was 'limitless'? You were completely wrong!"

Workers come from the countryside and are hardly "limitless"
Factory owners are having a tough time not only finding but retaining workers these days.

Rising labour costs have led to a high turnover rate among factory workers. Wuhan University did a survey of factories in Guangdong and Hubei and found 26 percent of workers in the Pearl River Delta had changed jobs.

"With high turnover, they have to pay workers more to retain them," said Albert Park, one of the designers of the survey and is a professor at the Hong Kong University of Science and Technology.

The average monthly wages in China rose to 4,126 yuan (US$603.78) per month in 2015, almost comparable to Brazil and much higher than developing economies like India and Vietnam.

In addition, in order to gain subsidies and tax benefits from the government, more than one-third of mainland factory owners try to gain favoritism from the state or the Communist Party. More than half surveyed received government subsidies, which account for 2.6 percent of their sales revenues.

Some factory owners resort to using robots to cut costs
About 23 percent of factory owners do this by serving in local parliaments and political consultative committees, while 39 percent are party members.

Because of rising labour costs, 40 percent of manufacturers in Guangdong and Hubei use robots in production. To Park, this means factory owners aren't sure demand will improve and so they are cautious about making large investments.

How much has changed in a decade! While we're pleased to know migrant workers are earning more money, the cost of living for them has increased too.

What they really need is access to education to further improve their employment opportunities. However, this is the next hurdle that really needs to be tackled so that children of migrant workers will at least see more hope for the next generation in terms of social and economic mobility.




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