Sunday, April 03, 2005

Help Wanted: China Finds Itself With a Labor Shortage

April 3, 2005
Help Wanted: China Finds Itself With a Labor Shortage

XINGXIANG, China - The pipeline that pours young, eager workers into China's manufacturing juggernaut begins in the country's interior at vocational schools like Hunan Top Software.

So it is here in Ningxiang, a 10-hour drive from the factories on the southern coast, that clues can be found to a problem once thought inconceivable: The world's most populous nation, which has powered its stunning economic rise with a cheap and supposedly bottomless pool of migrant labor, is experiencing shortages of about two million workers in Guangdong and Fujian, the two provinces at the heart of China's export-driven economy.

For Wu Dongshan, the job placement coordinator at Hunan Top, the most obvious sign of change is that factory recruiters now come to him, a reversal from three years ago, when he would make the long drive to Guangdong with busloads of students desperate for work.

"We were begging the factories to hire our students," Mr. Wu said. "We had too many students and not enough jobs."

No one thinks China is running out of workers. But young migrant workers coveted by factories are gaining bargaining power and many are choosing to leave the low pay and often miserable conditions in Guangdong. In a nondemocratic China, it is the equivalent of "voting with their feet."

March is one of the most important hiring months for China's factories, yet some analysts believe that the current shortfalls are the beginning of a long-term trend that is already bringing wage pressures and could eventually erode China's position as the world's dominant low-cost producer.

"It's not the end of the great China manufacturing story," said Jonathan Anderson, the chief Asia-Pacific economist for UBS. "But you're no longer going to be talking about China having labor so radically cheap that it will capture all the investment flows. This is an opening for Vietnam, it's an opening for India and Cambodia."

The shift, which experts say will happen gradually, began last year and is a result of two decades of strict family planning, which has made China one of the most rapidly aging countries in the world.

"The number of people in the labor force is going to be going down for the next 15 years," said Dali Yang, a professor of political science at the University of Chicago. "This is a shift in demographics that is really good, not just for salaries but for work conditions."

China remains a country where migrant workers are routinely exploited. But after a decade of stagnant wages, these workers are showing more willingness to demand their rights. Last year, factory workers rioted and held strikes in Guangdong. Other workers just left.

They can do that because economic growth in other regions has created increasing competition for workers. Many are leaving Guangdong for the rival Yangtze River Delta region near Shanghai, where many factories offer higher salaries. Others are starting to find work in larger cities in interior provinces. Some are simply returning to the farm.

"If we go to work in Guangdong, we work hard all year round but we can't save much money," said Tang Xiaoliang, a migrant worker who toiled in Guangdong factories but has returned to his village near Hunan Top. "The pay is too low. Whoever pays higher, I will go there."

The choices made by workers like Mr. Tang can influence the world's global trading network, because every decision about factory building, jobs and wages in China can alter the price of a toy at Toys R Us or socks at Wal-Mart.

Here in Ningxiang, a growing city in Hunan Province, workers began migrating south to Guangdong and the surrounding Pearl River Delta for jobs in the 1980's. At the Hunan Top Software vocational school, a recruiter from one of Guangdong's biggest electronics plants visited in December and signed 197 students up for jobs. But right now, it is unclear how many will go.

For many of the teenage students, who start working as young as 16, migrating to Guangdong often begins as a great adventure, a chance for farmers' children to see the outside world. But students like Ruan Xihua, 17, have not decided if they will take the promised job. Ms. Ruan is a tiny, cheery young woman whose parents were among the first generation of migrant workers to go to Guangdong in the 1980's.

"They told me it was pretty hard," she said. "They told me they wanted me to study hard."

Ms. Ruan is also an only child who says she wants to find work closer to home in case she needs to care for her parents.

"Most of these families have only one child because of family planning," Mr. Wu said. "They don't want their child to be far away from home."

That is one reason that Hunan's fast-growing provincial capital, Changsha, is beginning to siphon some workers back from Guangdong. Zu Xian, 22, quit a factory job in Guangdong because the high cost of living prevented her from saving money. She now matches her old factory wage by selling cosmetics at a new shopping mall in Changsha, a job that allows her far more free time and far less stress.

"Many people come back," she said. "They had stayed for too long and didn't have a better future. It's boring work. And there is not time to study or improve yourself."

Changsha is far from the only urban center competing with Guangdong for labor. Many workers are going to the booming Yangtze River Delta region, a hotbed of entrepreneurship powered by thousands of textile, electronics, software and automobile manufacturers.

Economists say the Yangtze Delta region, which encompasses coastal Jiangsu and Zhejiang Provinces, as well as Shanghai, is already beginning to rival Guangdong and the Pearl River Delta for manufacturing supremacy in China. Factory life can be bleak in the Yangtze Delta, but many manufacturers are raising pay and improving conditions.

At Zhongce Rubber, one of China's largest tire makers with about 5,000 employees, the company has begun construction of a new factory building. It will have free or subsidized food and housing for workers. The company also has raised the average worker's salary to $150 a month - above what most factories pay before overtime in Guangdong.

"Our company is doing very well, so we have to pay better," said Jiang Sheng Nian, a manager. "We feel that increasing salaries are inevitable."

Guo Ren, a rosy-cheeked 21-year-old woman from rural Anhui Province who now works at the tire company, first worked in an electronics factory in the city of Dongguan, in Guangdong. She earned about $50 a month, making chips that operate computer mouses, and lived in cramped dorms with strict curfews because of rising crime rates.

"I left Dongguan because it wasn't very safe and the living standards were not high," said Ms. Guo, who now earns close to $150 a month doing odd jobs at Zhongce.

Despite its problems, Guangdong is still a manufacturing powerhouse. In Guangdong and Fujian, the combined shortfall represents about 10 percent of the total migrant work force in those provinces.

Even so, the local authorities are taking action. Officials in different Guangdong cities, as well as the adjacent special economic zone of Shenzhen, are competing with one another to raise their local minimum wage. In early March, Shenzhen announced that it would raise its minimum to $83 a month from $74.

Factory operators, who have been experiencing worker shortages for more than six months, are also worried. Some withheld wages from migrant workers who went home for the Lunar New Year holiday in an effort to ensure they returned by March. In early March at the Sanhe Employment Center, a job fair in the manufacturing city of Baoan, billboards were filled with leaflets advertising thousands of openings at local factories.

"Some companies can't find workers for days," said Li Biyang, a recruiter at the job fair, who said smaller factories faced the worst problems. "Many small factories have bad management and bad working conditions. They aren't attentive to workers."

But many of the larger factories are scarcely better. Sheng Kehua, 22, plans to quit her job at a sprawling electronics factory in Baoan at the end of March. She works six days a week, 11 hours a day and earns, with overtime, about $118 a month. She lives in company dorm with 13 other workers.

"The boss always says we will try to work on that," Ms. Sheng said of requests for improvements. "But every time, nothing happens."

Factories covet young, female workers like Ms. Sheng because they are considered better at assembly line work and more docile than young men. In the past, these workers were largely cut off from the outside world, but now they use text messages or e-mail to check with friends at other factories about wages and treatment.

"I checked the Internet and learned that the pay level in Shanghai is better than here," Ms. Sheng said. Of the 30 workers who arrived with her three years ago, only 7 or 8 remain at the factory.

Zhao Weinan, who heads an association of Taiwanese-owned manufacturers in Dongguan, said factories once were very picky, setting age limits for new hires and often prohibiting workers from being married.

"In the old days, a company would just put a poster up, and you needed security to stop people from pouring in," Mr. Zhao said. "Now, you can post 100 notices and not find enough people."

He said Guangdong manufacturers operated on thin profit margins and could not raise salaries too high. "If you raise salary, you raise production costs," he said.

And if wages keep rising, he said, some companies could face a fate familiar to many manufacturers in the United States - they would have to move to a country with cheaper workers.

Jim Yardley reported from Ningxiang, Shenzhen and Guangdong for this article, and David Barboza from the Yangtze Delta region and Guangdon.