Labor shortages in China

Led by many so—called experts in the mainstream media, millions of hard—working Americans have come to believe that China has an endless supply of cheap laborers willing to work super long hours for meager wages. While it is true millions of migrant workers have endured managerial mistreatment and poor working conditions, a more complex reality is starting to emerge.  

With China's one—child policy (selectively enforced, mostly in large cites) and rapid urbanization during the past two decades, demographic experts in the Middle Kingdom are starting to predict that the country faces a shortage of labor in the near future due to plummetging population growth. 

As reported by the state—run Xinhua News Agency [whose English translations are sometimes awkward], Xie Fang, the deputy director and a researcher with the Institute of Population and Labor Economics at the Chinese Academy of Social Sciences, claims that:

China's population is expected to peak at 1.44 billion by 2033 while the labor population is expected to no longer increase by 2011. However, the peak time came much earlier than expected thanks to that [sic] the national policy of family planning has worked and that the old—age population grow. As a result, the decline of the increase rate of the labor population has materialized in recent years.
   
Statistics show the proportion of jobs and job hunters is increasing year by year in 117 cities nationwide, climbing as much as 95 percent in the second quarter in 2005 when compared with 65 percent in the first quarter of 2001. 

These demographic trends are turning China's labor market from a "limitless supply" into a "limited surplus' with labor supply gaps showing up in the manufacturing strongholds, most notably in the south city of Shenzhen. 

According to a recent survey of mostly labor—intensive firms in Shenzhen, there is an estimated shortage of 100,000 workers. The shortage in the city of Dongguan is even more severe.

Just as more orders for a variety of labor—intensive products are coming in from Western retailers in preparation for the Christmas season, Chinese manufacturers in the Pearl River Delta, are increasingly nervous.  Managers have been reportedly forced to increase wages and improve working conditions to attract and keep their best workers.   

Many Western firms have their supply chains spread all across Asia. If effective solutions are not implemented soon, these shortages could slowly drag down growth rates in world's fastest growing economy and increase inflationary pressures in developed countries that have come to rely on Chinese exports. I hope you are paying attention, Mr.
Greenspan.

Brian J. Schwarz    10 10 05