EconoChina

A blog on Chinese economy & society

Migration changes drive labor shortage in China

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China National Statistical Bureau came out with a new report on the migration pattern and offers quite a bit of insight on the recent labor shortage story.

The report estimated that total migrant workers increased by 1.9% to 230 million (yes, this is China after all) in 2009. So why do we keep hearing this labor shortage thing? Well, it seems that the reason these are migrant workers is that they…ahem…migrate. And now the trend is to go west rather than the traditional eastern coastal cities. Total eastern bound migrants dropped by 9%, and Guangdong was hit especially hard with a 26% (!) free fall. Given this background, Guangdong’s announcement on Wednesday of a 21% pay raise isn’t so surprising anymore.

So what have these people been dong in western China? Isn’t Chinese wealth concentrated in the East and the West is just some rural backwater?

Apparently the massive “Go West” project that the government has been promoting over the past decade has finally borne fruit. Between high tech MNCs like Intel and Applied Materials setting up labs to take advantage of amply available cheap engineers and Chinese government’s push for massive infrastructure project that soak up unskilled labor,  western China is finally catching up. So much so that migrant pay in western China is only 10% less than that in the East now. Given the tremendous difference in cost of living between the regions, is it any surprise that the migrants are telling eastern sweatshops to take a hike?  Plus, they get to visit their loved ones a lot more now being employed closer to home, and the eastern city-dwellers generally treat them with contempt. With these social benefits thrown in, it’s almost a no brainer. The effect is so dramatic that Hong Kong Trade Development Center reported recently that more than half of Guangdong’s factories are experiencing labor shortage.

Over the longer term, these changes in migration pattern are unlikely to reverse. The provincial government of Guangdong is planning to upgrade its economy a la South Korea, i.e. by moving up the value chain. The lower end manufacturing is likely to ship out, with Vietnam as a prime location. What does this mean? It means that in a few years, rather than Samsung and Kia making the news, it might be Meide and BYD. And the folks there might finally embrace shopping as a hobby.

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Written by Cindy Luk

March 19, 2010 at 9:06 pm

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