Tough times expected for employers as local govts plan wage hikes

Many migrant workers in China who made the annual trek home for the Chinese New Year holiday have failed to return to work, creating a serious labor shortage for companies in the country's coastal region.

For many, the holiday season mass migration has turned into a one-way trip because living and working conditions in their hometowns have been improving over the past decade. Many have abandoned jobs in the cities and decided to look for positions closer to home.

"We had more than 20 workers but only half of them have come back after the holiday," said Cheng Xuepeng, general manager of a wood factory in Pudong New Area of Shanghai.

It is becoming harder to find workers despite offering 300 yuan ($47, 36 euros) a month more than last year, he said.

"Migrant workers did not question pay and benefits in the past, but now it's the first thing they ask about."

In recent years, China has been grappling with the problem of an ageing population as the number of people in retirement grows and the working population shrinks. In fact, the country's annual increase of new labor has been unable to meet increased demand since 2004.

At the same time, the younger generation of migrant workers, unlike their parents, show little interest in low-paid and physically demanding jobs such as construction and manufacturing.

With rising incomes in rural areas and the rapid development of inland cities, many migrant workers have decided to find jobs close to home as long as they can make ends meet.

Analysts say the labor shortage for employers in the affluent southern and coastal regions will worsen in coming years, which may force local governments to continue to raise minimum wages and employers to offer better incentives.

The human resources and social security department of Guangdong province, a major manufacturing hub, said recently that the province would raise the minimum wage by no less than 13 percent this year.

Previously the department had said that it would postpone a rise in the minimum wage originally due on Jan 1 to help local businesses weather the global market turmoil.

Some companies in the coastal region have already taken measures to prevent losing staff.

"The bonus for those who return to work on time is about 1,000 yuan," said Zhou Baixian, deputy general manager of a shoe maker in Zhejiang province.

"In addition, we offer a reward of 100-600 yuan to those who return and introduce other workers to the factory."

Analysts also attribute the labor shortage to incomplete urbanization and the resident registration system, which prevent migrant workers from basic public services including housing, education, healthcare and pension even though they can move freely from rural areas to the coastal cities.

"Migrant workers have not been fully integrated into the urban areas, and the lack of protection of basic rights in the cities has distorted market supply and labor demand," said Li Shi, a professor at Beijing Normal University.

The government needs to take steps to ensure migrant workers enjoy the same rights as their urban counterparts to increase their incentives to stay in the cities where they work, Li said.

Gu Yueming, deputy director of Shanghai SME Development and Service Center, said low-rent housing has been introduced to help new workers in the city.

"But it's still far from affordable for laborers, whose average pay is a little more than 2,000 yuan a month."

Analysts say one possible effect of the demographic shift and the shortage of workers is a rise in the cost of products made in China and thus in domestic prices. Some foreign companies are already switching their investment to countries such as Vietnam and Cambodia where labor is cheaper.

Eighty-five percent of US executives in China who responded to a recent survey said rising costs are a problem. According to the US-China Business Council survey, nearly 80 percent of those executives said this would have "some impact" on long-term investment plans.

Cai Fang, director of the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences, said the government needs to tackle the structural problem of labor markets as the economy faces the risk of a slowdown coupled with a serious labor shortage in coming years.

"China's 'demographic dividend' is waning. Its traditional advantage in labor costs is disappearing, and the high-tech sector is not competitive enough."

However, not everybody regards the labor shortage as necessarily a bad thing.

Zhou Shijian, a senior researcher at Tsinghua University, said more expensive labor would force businesses to upgrade technology to improve efficiency. Some companies may also move inland to employ local workers, which could promote development of second-tier cities in the inland provinces.

The competition for labor among employers could also raise low salaries and the living and working standards of migrant workers as their social security needs such as pensions, medical care and work accident compensation will be gradually met, some experts say.

(China Daily 02/03/2012 page3)