EconoChina

A blog on Chinese economy & society

Labor shortage in China

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Hiring in China

Yes, you heard right. The world’s most populous nation is experiencing labor shortage.

Migrant workers traditionally return to the various coastal manufacturing cities after the Chinese New Year to look for new opportunities. This year all the talk is about difficulty to attract workers, or more precisely low-skilled workers which built the reputation of China as the world’s work shop. So what’s changed this year?

Several factors probably compounded to work towards advancing the bargaining power of migrant workers. First and foremost is simply demographics. With the rapid industrialization of China, there simply aren’t as much surplus rural labor as before, reaching the so-called Lewisian Turning Point.

Increased subsidies for agriculture and the development of the inland cities also serve to depress supply of rural labor. Both make working in far away coastal cities where people speak different dialects and have different customs and generally treat migrant workers with contempt a lot less attractive.

Demographic change within the migrant worker population is also an important factor. Most of the current migrant workers are born after the Reform. Hence they are better educated and are a lot more demanding in other workers’ rights than their forefathers. Sweat shops face increasing difficulties in attracting them despite increases in pay.

Since all these factors are not likely to revert trend, China’s labor shortage problem will only get more severe as time goes. Its manufacturers will either have to move up the value chain, or move out, to inland provinces or other countries like Vietnam. The bad news for the developed economies is that their manufacturers will face more competition higher up the value chain, the good news is that China’s domestic market will grow substantially given the higher growth in wages in the coming years.

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Written by Cindy Luk

February 28, 2010 at 5:26 pm

One Response

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  1. […] cited so we’ll just leave it at that for now. However, given the change in demographics (see here), there’s less pressure on creating new jobs now. So China can actually afford a slower […]


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