So the great Chinese labor shortage of 2010 appears to be unwinding. Anecdotal reports from factories in Shenzhen suggest that the city’s alleged 800,000 job vacancies will all be filled by the end of the month.
When the fears about a labor shortage started circulating last month, I cautioned that it was too early to tell. There’s no point in trying to judge whether or not migrant workers are coming back in the first week after Chinese New Year. Almost every migrant worker stayed at home for longer, often until the Lantern Festival on February 28.
I even wonder if its this late holiday that has delayed the shipping of Apple’s iPads out of Foxconn’s factories.
Nevertheless, it is clear that many coastal factories have had to raise their wages in order to fill positions and tempt workers away from inland areas.
"Migrant workers are a lot more fussy than before," said He Suwei, chairman of Hangzhou Weibang Airflow Spinning Co in Zhejiang province to the China Daily. "They don’t just talk money; they talk about working environments, holidays and other fringe benefits we have not even heard of before. Workers have more say than us now because they have a wider choice."
Many factories are saying that they had to boost pay packets by 100 yuan or 200 yuan in order to lure people back, and that the average wage for a migrant worker is now close to 2,000 rmb a month ($293).
As Li Yining, the honorary president of the Guanghua School of Management at Beijing University puts it: “The labor shortage is a signal that the days of cheap labor are coming to an end. It forces companies to upgrade technologies or to move inland. In this sense, it is a good thing. Farmers in provinces like Hunan and Jiangxi can now plant trees and mushrooms and sell them. They may prefer to stay home than work in small factories in Guangdong.”
The bad news is that Chinese companies can only raise wages so far. Compare the Chinese wages of between 1,500 yuan and 2,000 yuan a month with the wages in Bangladesh, where workers in the garment industry typically get $36 to $50 a month. The Chinese wages are already almost six times as high.
Companies continue to manufacture in China because the country is reliable, predictable and has good infrastructure. But if costs rise further, they may be tempted to start switching out.