Chinese Labor, Cheap No More

 As Xi Jinping’s U.S. Visit came to an end, concerns remained over various issues in the bilateral relationship, such as the lack of enforcement of property rights. And China’s cheap labor, a mainstay of the U.S. consumer economy, may not be so cheap anymore. The New York Times reports:

Although nearly two weeks have passed since the Lantern Festival that officially marks the end of the 15-day holiday, cities across China are still facing a serious labor shortfall. In order to lure new workers and retain the old, some companies give employees sizable bonuses just for coming back to work, while others offer cash for every new employee they bring along with them. And in many areas, wage increases ranging from 10 to 30 percent have become the norm.

Despite all this, cities like Beijing, Shenzhen and Guangzhou are still short hundreds of thousands of migrant workers. Shandong Province is missing a full third of its migrant work force, and Hubei Province reports a loss of more than 600,000 workers. Last week, the Chinese government released a report describing this year’s post-Spring Festival labor shortage as not only more pronounced than in years past, but also longer-lasting and wider in scope.

At the same time, China’s population has been steadily aging, and by 2020 the nation will have more than 200 million people over age 60. Furthermore, rising living costs in urban China coupled with markedly improved conditions in rural areas are encouraging many would-be migrant workers to look for opportunities closer to home.

In addition to a shortage in the sheer number of available workers, China’s labor problems are further exacerbated by a shift in the quality and character of its work force. For the older generation, there is very little that a factory or foreman can dish out that seems too difficult to deal with, given that they witnessed, or grew up with parents who had witnessed, the nation’s rocky ride through the Communist Revolution, collectivization, the disastrous Great Leap Forward and the Cultural Revolution. These are the people who pioneered the model of migrant labor on which Chinese manufacturing has come to depend: long hours in substandard conditions, all for a fraction of what United States workers earn.

While China is seeing a shift in labor, Foxconn Technologies, the biggest contract manufacturer of electronics, Foxconn, seems to be following suit by raising their wages for the third time since 2010. Bloomberg reports:

Pay rose by 16 percent to 25 percent starting Feb. 1, the company said in an e-mailed statement yesterday. The basic monthly pay of a junior worker in Shenzhen has risen to 1,800 yuan ($290) from 900 yuan three years ago, it said. Foxconn will raise monthly salaries to more than 2,200 yuan for workers who pass technical examinations, it said.

The announcement came after Apple said the Fair Labor Association started its audit of Foxconn’s plants in China this week. Apple became the first technology company to join the Washington-based work-standards group last month, after criticism by human-rights organizations over conditions at suppliers including Foxconn.

The basic salary of junior workers in Foxconn’s China factories is already far higher than the minimum wage set by all local governments, Foxconn said in yesterday’s statement.

Foxconn more than doubled wages for some workers in China and employed counselors two years ago after a spate of suicides at the company. Last year, an explosion at its Chengdu plant killed three workers.

For more about China’s labor supply, see this week’s edition of CDT Money.

February 19, 2012 1:21 PM
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