Labour Supply: Falling Short

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There are at least 764 million (and counting) reasons to believe that you will be able to find affordable staff for your business in China. As People’s Daily explains:

    “China had employed a total of 764 million people by the end of 2006, an increase of 5.75 million people over the year-end of 2005, and there were 8.47 million registered urban unemployed people with the urban jobless rate of 4.1 percent…according to the 2006 annual labor and social insurance statistical communique released jointly by the Ministry of Labor and Social Security and the National Bureau of Statistics (NBS) on May 18.

    …325.6l million people, or 42.6 percent, come from the first industry or agriculture; 192.25 million, or 25.2 percent are from the second industry or the industry; and 246. 14 million people, or 32.2 percent, are from the tertiary sector, or service trade.

    ….the average annual salary of workers from urban work units amounts to 21,001 yuan, a rise of 14.4 percent rise over 2005 and, deducting price factors, the actual increase rate was 12.7 percent. The average annual wages of on-job workers in the state-owned enterprises reached 22,112 yuan, that of those working in collective units was 13,014 yuan, and that of those in other units was 20,755 yuan, with an average daily income of 83.66 yuan for urban workers.

But despite the big numbers, it is not so simple. In another article People’s Daily reports that:

    “China has been shifting from an era of excessive labor power to a labor power shortage, with its turning point likely to occur in the 11th Five-Year Plan (2006-2010) period and, to be spefic [sic], it could be in 2009.

    According to the “China Employment Growth and its Structural Change” released by Cai Fang, director of the Institute of Population and Labor economics under CASS [Chinese Academy of Social Sciences]…China’s current labor supply structure is being shifted from the surplus to the labor power balance, even to the labor force shortage at times.”

All those textiles factories and widget makers better be prepared for a more competitive marketplace for staff. And, as previously noted, some may start looking inland, or even overseas, in order to maintain margins. Asia times points to problems that already exist:

    “The recent labor shortage in the Pearl River Delta region, a hub for labor-intensive industries, is a sign of this trend, said [Cai Fang, director of the Institute of Population and Labor Economics, and the report’s leading author] “The phenomenon is spreading gradually from coastal areas to central China or even some provinces that boast huge labor surpluses.

    The labor force, however, will continue to take up a large proportion of the population for a long time, added Cai. In fact, the labor force will continue growing until 2015, the first year likely to see “zero increase”.”

Labour shortages will lead to more competition and higher wages. It is no co-incidence that the government has been busy promoting higher added-value activities and services to balance the trend, or that workers’ rights have been gaining ground.

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One Response to “Labour Supply: Falling Short”

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