CHINA : LABOR PINCH = Increase in prices

[carbonmarine]

For all you that bitch... the economic theory is alive and well....
Costs are rising and prices may be next
GUANGZHOU, China To much of the world, China's reputation for manufacturing can be summed up in one word: cheap.
.
But on the factory floors here and in the new, neon-lit offices, managers say times are changing - and costs are rising. Skilled workers and technicians are taking advantage of acute shortages to demand double-digit salary increases. Employers are saddled with Asia's highest levels of social charges and forced to offer a host of perks to retain people.
.
The rising labor costs are threatening the model of development - the export zones clustered along the coast - that has brought China the prosperity of the past decade.
.
Chinese wages are still low by European or American standards, but a worker in a sneaker factory in southern China today is paid about 30 percent more than his counterpart in Vietnam and 15 percent more than a worker in Indonesia. (See Workplace column, Page 13) Some big companies are moving production to Vietnam and still others are considering moving inland in China, where labor is cheaper but logistics much more difficult and thus more costly.
.
For consumers around the world, rising costs in China could signal an end to the years of deflationary cycles of cheaper and cheaper products.
.
Here in southeastern China, the persistent shortages of migrant workers prompted local officials in February to raise the minimum wage by as much as 34 percent, the largest increase in a decade, to between $70 and $82 a month. This brings southern China to the minimum wage levels of Thailand and puts it well above the $30 to $50 levels of Bangladesh, $45 in Vietnam and Cambodia, and $35 in rural parts of Indonesia.
.
"Five years ago we would have never thought this was possible," David Lai, the financial controller for Kingmaker Footwear Holdings, said of the sharp increase in Chinese wages.
.
Kingmaker makes Timberland and Caterpillar shoes and plans to hire about 2,000 workers in Vietnam to make up for a shortage of the same number of people in its factories in China. But not everyone can shift production to Vietnam, so Lai predicts that a key consequence of higher Chinese wages will be higher prices. "China is the biggest manufacturer in the world," he said. "If the overall labor cost goes up, the world has no choice - they have to accept it."
.
Economists say there are no signs yet that Chinese products overall are getting more expensive. Chinese exports continue to rise and the economy is surging forward. But the years of massive investment flows into the country are severely straining the country's labor force.
.
The days when you could open a factory near Hong Kong and easily fill it with dirt-cheap workers are over, human resource managers said, especially with a labor shortage of two million people in southeast China.
.
How can a country with 1.3 billion people have a labor shortage? Population experts say factories are seeking a very specific type of worker: young, very mobile, willing to work very long hours and be far away from their families. There are plenty of underemployed people in the Chinese countryside, but most of them do not fit this profile.
.
At the upper end of the pay scale, competition for technical and white-collar talent in Beijing, Shanghai and other industrial areas is so fierce that salaries for certain categories of employees are approaching U.S. and European levels.
.
A Guangdong newspaper last week gave the example of Hu Cai Publishing, which is so desperate to hire a maintenance man that it is offering an annual salary of up to 150,000 yuan, or $18,000, a huge sum by Chinese standards and many times what a professor with a doctorate would earn.
.
"People need to take off the rose-colored glasses and take a hard look at pay levels and benefits - and the total cost that it takes to set up here," said Jessica Pfeifer, a specialist on compensation at Hewitt Associates, a human resources consultancy in Shanghai.
.
.
The labor and skills shortages have spurred debates in the Chinese press, with one article earlier this month in Workers' Daily saying there are "very critical structural problems in the Chinese labor force." The publication of such frank articles is seen as a sign that the authorities in Beijing are worried.
.
"China's biggest paranoia is how it can maintain a competitive position," said P.O. Mak, senior vice president for human resources at GE Consumer Finance Asia. "It's increasingly a serious concern - these rising costs are eating into income. Companies that do not have the scale will be hurt."
.
Yet even companies that do have scale are finding China's eastern coast increasingly expensive. It now costs more for Intel, the computer chip manufacturer, to assemble chips at its plant in Shanghai than at its facility in Malaysia, said a senior manager at the company. To reduce costs, Intel is building a plant outside the central Chinese city of Chengdu, where labor is cheaper but logistics more complex.
.
Other companies are so worried about losing workers that they are trying innovative things to retain them. Epson, the printer manufacturer, chartered 58 buses over the Chinese New Year to take workers from the company's Suzhou factory to their hometowns and then back to the factory once the holiday was over. "The workers appreciated that very much," said Vincent Leung, a human resources executive with the company. "Our retention rate improved by 8 percent."
.
The fact that the labor shortage in southeast China of about two million workers has persisted for more than nine months is leading Chinese commentators to question the very formula that has brought the country its growing prosperity. Economists are debating whether the system of export processing zones, where factory workers travel thousands of kilometers to their workplaces, is sustainable.
.
For years this extraordinary degree of mobility in the labor force was a dream for businesses in China because it meant that factories could cluster along the coast, surrounded by their suppliers and near the container ships that carry their goods to overseas markets. Workers travel for as long as 30 hours by bus or train to these factories and then live in dormitories provided by the factories.
.
Today, managers in southeast China say it is looking increasingly likely that factories will soon have to move to where the workers live - and not the other way around. But this of course is more costly for business.
.
"Sooner or later we'll have to move," said Samson Chan, chairman of the Hong Kong Toys Council, an association of companies with toy factories in southeast China. "But when you talk about moving it always costs a lot of money. You have to start from scratch, make a new building, train new people."
.
Critics say the migrant labor system has helped contribute to low rates of training for workers. A government report on labor and skills shortages released last year criticized the culture of disposable workers, where employers did not adequately train migrants because they knew they might not be with the company in the long term.
.
"There is a practice of using workers but not developing them," said the report issued by the Chinese Labor Ministry.
.
This constant churning in the labor market was reflected in a survey carried out in November by UBS, the investment bank. Employees in southern China keep jobs for an average of 2.1 years before moving on, the survey said.
.
"The system is inherently problematic," said Apo Leong, executive director of the Asia Monitor Resource Center, a group that inspects factory conditions. "There is no guarantee of an abundant supply of migrant workers, especially with this kind of assembly line development."
.
The effects of the shortage are being keenly felt on the ground here in Guangdong Province, across from Hong Kong.
.
Chan of the Toys Council said factory owners were very concerned about the 2005 Christmas season, which normally requires about 20 percent increases in staffing levels and which will begin soon because of the shipping time to Western markets.
.
"A lot of manufacturers are worried that there will be a huge shortage of workers starting in May and June," he said. This is despite salary increases of 25 to 30 percent this year, he added.
.
Chan also said that toys produced this Christmas could be marginally more expensive than those for last year because of labor costs.
.
The labor shortage is sometimes portrayed as a short-term problem that is specific to Guangdong, a province that is disproportionately reliant on migrant workers. But some population experts say that it is related to a demographic shift in China and that the situation could get worse with time, especially if factories keep opening at the current breakneck pace.
.
Dali Yang, a professor of political science at the University of Chicago, predicted in an article that the supply of entry-level, low-skilled industrial workers had started to shrink.
.
Because of the effects of the one-child policy, which was implemented in 1979, the number of people aged 15 to 19 will decline by 17 percent in five years, to about 103 million from 124 million today. That decline of about 21 million people is the equivalent of about four times the population of Denmark.
.
Managers say it is logical that wages will continue to rise if shortages persist. An average worker in a sneaker factory now makes the equivalent of about $100 a month. For some labor intensive factories with tens of thousands of workers, that is too expensive.
.
Dream International, the world's largest maker of stuffed animal toys, said earlier this month that it would hire 6,000 workers in Vietnam this year to fill expanded factories but none in China. The company is operating at 80 percent capacity in China because it cannot find enough workers.
.
Salaries are only part of what employers in China have to pay. One striking difference between China and its Asian neighbors is the high cost of social charges. Sometimes called "mandatory benefits," they include a social security tax, medical care tax and housing savings plan, all of which add up to the equivalent of 40 to 50 percent of an employee's salary.
.
According to Watson Wyatt, a consultancy that specializes in remuneration issues, these nonsalary costs in India equal 16 percent of an employee's salary, in Malaysia 12 percent, in Indonesia 10 to 15 percent, and in Australia 20 percent. "We do emphasize to clients who are coming to China for the first time that China is not a cheap place to do business," said Bob Charles, a senior consultant at Watson Wyatt.
.
These social charges have been around for years and in some cases are capped. But the difference today, Pfeifer of Hewitt Associates said, is that many companies are so desperate to retain top managers that they are increasing other perks.
.
"You need to be offering some supplemental benefits, things like supplemental medical, housing or savings plans - retention focused plans that often are cash-based in the end but put hooks in the organization to retain people," she said. When these types of benefits are factored in, companies are paying an average of an additional 80 percent of an employee's salary in benefits, Pfeifer said.
.
Yet even with the extra perks, many Chinese employees are taking advantage of the high demands for their skills and leveraging job offers.
.
"The reality is that if you go across the street you're going to get 20 to 30 percent higher pay," said Jim Hemerling, senior vice-president at the Boston Consulting Group in Shanghai.
.
An article in the People's Daily this month gave these striking figures: For every experienced skilled worker, there are 88 vacancies, and for every factory technician there are 16 vacancies.
.
The intense competition for workers is reminiscent of the go-go years in Southeast Asia, when similar shortages drove up salaries and real estate prices to levels that eventually led to the collapse of some Asian economies in 1997.
.
Charles of Watson Wyatt said that rising costs in China were unlikely to lead to large-scale moves by the manufacturers to Southeast Asian countries, where total labor pools are considerably smaller.
.
He does not rule out India, however.
.
.
See more of the world that matters - click here for home delivery of the International Herald Tribune.
.
< < Back to Start of Article
Costs are rising and prices may be next
GUANGZHOU, China To much of the world, China's reputation for manufacturing can be summed up in one word: cheap.
.
But on the factory floors here and in the new, neon-lit offices, managers say times are changing - and costs are rising. Skilled workers and technicians are taking advantage of acute shortages to demand double-digit salary increases. Employers are saddled with Asia's highest levels of social charges and forced to offer a host of perks to retain people.
.
The rising labor costs are threatening the model of development - the export zones clustered along the coast - that has brought China the prosperity of the past decade.
.
Chinese wages are still low by European or American standards, but a worker in a sneaker factory in southern China today is paid about 30 percent more than his counterpart in Vietnam and 15 percent more than a worker in Indonesia. (See Workplace column, Page 13) Some big companies are moving production to Vietnam and still others are considering moving inland in China, where labor is cheaper but logistics much more difficult and thus more costly.
.
For consumers around the world, rising costs in China could signal an end to the years of deflationary cycles of cheaper and cheaper products.
.
Here in southeastern China, the persistent shortages of migrant workers prompted local officials in February to raise the minimum wage by as much as 34 percent, the largest increase in a decade, to between $70 and $82 a month. This brings southern China to the minimum wage levels of Thailand and puts it well above the $30 to $50 levels of Bangladesh, $45 in Vietnam and Cambodia, and $35 in rural parts of Indonesia.
.
"Five years ago we would have never thought this was possible," David Lai, the financial controller for Kingmaker Footwear Holdings, said of the sharp increase in Chinese wages.
.
Kingmaker makes Timberland and Caterpillar shoes and plans to hire about 2,000 workers in Vietnam to make up for a shortage of the same number of people in its factories in China. But not everyone can shift production to Vietnam, so Lai predicts that a key consequence of higher Chinese wages will be higher prices. "China is the biggest manufacturer in the world," he said. "If the overall labor cost goes up, the world has no choice - they have to accept it."
.
Economists say there are no signs yet that Chinese products overall are getting more expensive. Chinese exports continue to rise and the economy is surging forward. But the years of massive investment flows into the country are severely straining the country's labor force.
.
The days when you could open a factory near Hong Kong and easily fill it with dirt-cheap workers are over, human resource managers said, especially with a labor shortage of two million people in southeast China.
.
How can a country with 1.3 billion people have a labor shortage? Population experts say factories are seeking a very specific type of worker: young, very mobile, willing to work very long hours and be far away from their families. There are plenty of underemployed people in the Chinese countryside, but most of them do not fit this profile.
.
At the upper end of the pay scale, competition for technical and white-collar talent in Beijing, Shanghai and other industrial areas is so fierce that salaries for certain categories of employees are approaching U.S. and European levels.
.
A Guangdong newspaper last week gave the example of Hu Cai Publishing, which is so desperate to hire a maintenance man that it is offering an annual salary of up to 150,000 yuan, or $18,000, a huge sum by Chinese standards and many times what a professor with a doctorate would earn.
.
"People need to take off the rose-colored glasses and take a hard look at pay levels and benefits - and the total cost that it takes to set up here," said Jessica Pfeifer, a specialist on compensation at Hewitt Associates, a human resources consultancy in Shanghai.
.
.
The labor and skills shortages have spurred debates in the Chinese press, with one article earlier this month in Workers' Daily saying there are "very critical structural problems in the Chinese labor force." The publication of such frank articles is seen as a sign that the authorities in Beijing are worried.
.
"China's biggest paranoia is how it can maintain a competitive position," said P.O. Mak, senior vice president for human resources at GE Consumer Finance Asia. "It's increasingly a serious concern - these rising costs are eating into income. Companies that do not have the scale will be hurt."
.
Yet even companies that do have scale are finding China's eastern coast increasingly expensive. It now costs more for Intel, the computer chip manufacturer, to assemble chips at its plant in Shanghai than at its facility in Malaysia, said a senior manager at the company. To reduce costs, Intel is building a plant outside the central Chinese city of Chengdu, where labor is cheaper but logistics more complex.
.
Other companies are so worried about losing workers that they are trying innovative things to retain them. Epson, the printer manufacturer, chartered 58 buses over the Chinese New Year to take workers from the company's Suzhou factory to their hometowns and then back to the factory once the holiday was over. "The workers appreciated that very much," said Vincent Leung, a human resources executive with the company. "Our retention rate improved by 8 percent."
.
The fact that the labor shortage in southeast China of about two million workers has persisted for more than nine months is leading Chinese commentators to question the very formula that has brought the country its growing prosperity. Economists are debating whether the system of export processing zones, where factory workers travel thousands of kilometers to their workplaces, is sustainable.
.
For years this extraordinary degree of mobility in the labor force was a dream for businesses in China because it meant that factories could cluster along the coast, surrounded by their suppliers and near the container ships that carry their goods to overseas markets. Workers travel for as long as 30 hours by bus or train to these factories and then live in dormitories provided by the factories.
.
Today, managers in southeast China say it is looking increasingly likely that factories will soon have to move to where the workers live - and not the other way around. But this of course is more costly for business.
.
"Sooner or later we'll have to move," said Samson Chan, chairman of the Hong Kong Toys Council, an association of companies with toy factories in southeast China. "But when you talk about moving it always costs a lot of money. You have to start from scratch, make a new building, train new people."
.
Critics say the migrant labor system has helped contribute to low rates of training for workers. A government report on labor and skills shortages released last year criticized the culture of disposable workers, where employers did not adequately train migrants because they knew they might not be with the company in the long term.
.
"There is a practice of using workers but not developing them," said the report issued by the Chinese Labor Ministry.
.
This constant churning in the labor market was reflected in a survey carried out in November by UBS, the investment bank. Employees in southern China keep jobs for an average of 2.1 years before moving on, the survey said.
.
"The system is inherently problematic," said Apo Leong, executive director of the Asia Monitor Resource Center, a group that inspects factory conditions. "There is no guarantee of an abundant supply of migrant workers, especially with this kind of assembly line development."
.
The effects of the shortage are being keenly felt on the ground here in Guangdong Province, across from Hong Kong.
.
Chan of the Toys Council said factory owners were very concerned about the 2005 Christmas season, which normally requires about 20 percent increases in staffing levels and which will begin soon because of the shipping time to Western markets.
.
"A lot of manufacturers are worried that there will be a huge shortage of workers starting in May and June," he said. This is despite salary increases of 25 to 30 percent this year, he added.
.
Chan also said that toys produced this Christmas could be marginally more expensive than those for last year because of labor costs.
.
The labor shortage is sometimes portrayed as a short-term problem that is specific to Guangdong, a province that is disproportionately reliant on migrant workers. But some population experts say that it is related to a demographic shift in China and that the situation could get worse with time, especially if factories keep opening at the current breakneck pace.
.
Dali Yang, a professor of political science at the University of Chicago, predicted in an article that the supply of entry-level, low-skilled industrial workers had started to shrink.
.
Because of the effects of the one-child policy, which was implemented in 1979, the number of people aged 15 to 19 will decline by 17 percent in five years, to about 103 million from 124 million today. That decline of about 21 million people is the equivalent of about four times the population of Denmark.
.
Managers say it is logical that wages will continue to rise if shortages persist. An average worker in a sneaker factory now makes the equivalent of about $100 a month. For some labor intensive factories with tens of thousands of workers, that is too expensive.
.
Dream International, the world's largest maker of stuffed animal toys, said earlier this month that it would hire 6,000 workers in Vietnam this year to fill expanded factories but none in China. The company is operating at 80 percent capacity in China because it cannot find enough workers.
.
Salaries are only part of what employers in China have to pay. One striking difference between China and its Asian neighbors is the high cost of social charges. Sometimes called "mandatory benefits," they include a social security tax, medical care tax and housing savings plan, all of which add up to the equivalent of 40 to 50 percent of an employee's salary.
.
According to Watson Wyatt, a consultancy that specializes in remuneration issues, these nonsalary costs in India equal 16 percent of an employee's salary, in Malaysia 12 percent, in Indonesia 10 to 15 percent, and in Australia 20 percent. "We do emphasize to clients who are coming to China for the first time that China is not a cheap place to do business," said Bob Charles, a senior consultant at Watson Wyatt.
.
These social charges have been around for years and in some cases are capped. But the difference today, Pfeifer of Hewitt Associates said, is that many companies are so desperate to retain top managers that they are increasing other perks.
.
"You need to be offering some supplemental benefits, things like supplemental medical, housing or savings plans - retention focused plans that often are cash-based in the end but put hooks in the organization to retain people," she said. When these types of benefits are factored in, companies are paying an average of an additional 80 percent of an employee's salary in benefits, Pfeifer said.
.
Yet even with the extra perks, many Chinese employees are taking advantage of the high demands for their skills and leveraging job offers.
.
"The reality is that if you go across the street you're going to get 20 to 30 percent higher pay," said Jim Hemerling, senior vice-president at the Boston Consulting Group in Shanghai.
.
An article in the People's Daily this month gave these striking figures: For every experienced skilled worker, there are 88 vacancies, and for every factory technician there are 16 vacancies.
.
The intense competition for workers is reminiscent of the go-go years in Southeast Asia, when similar shortages drove up salaries and real estate prices to levels that eventually led to the collapse of some Asian economies in 1997.
.
Charles of Watson Wyatt said that rising costs in China were unlikely to lead to large-scale moves by the manufacturers to Southeast Asian countries, where total labor pools are considerably smaller.
.
He does not rule out India, however.
.
.
See more of the world that matters - click here for home delivery of the International Herald Tribune.
.
< < Back to Start of Article
Costs are rising and prices may be next
GUANGZHOU, China To much of the world, China's reputation for manufacturing can be summed up in one word: cheap.
.
But on the factory floors here and in the new, neon-lit offices, managers say times are changing - and costs are rising. Skilled workers and technicians are taking advantage of acute shortages to demand double-digit salary increases. Employers are saddled with Asia's highest levels of social charges and forced to offer a host of perks to retain people.
.
The rising labor costs are threatening the model of development - the export zones clustered along the coast - that has brought China the prosperity of the past decade.
.
Chinese wages are still low by European or American standards, but a worker in a sneaker factory in southern China today is paid about 30 percent more than his counterpart in Vietnam and 15 percent more than a worker in Indonesia. (See Workplace column, Page 13) Some big companies are moving production to Vietnam and still others are considering moving inland in China, where labor is cheaper but logistics much more difficult and thus more costly.
.
For consumers around the world, rising costs in China could signal an end to the years of deflationary cycles of cheaper and cheaper products.
.
Here in southeastern China, the persistent shortages of migrant workers prompted local officials in February to raise the minimum wage by as much as 34 percent, the largest increase in a decade, to between $70 and $82 a month. This brings southern China to the minimum wage levels of Thailand and puts it well above the $30 to $50 levels of Bangladesh, $45 in Vietnam and Cambodia, and $35 in rural parts of Indonesia.
.
"Five years ago we would have never thought this was possible," David Lai, the financial controller for Kingmaker Footwear Holdings, said of the sharp increase in Chinese wages.
.
Kingmaker makes Timberland and Caterpillar shoes and plans to hire about 2,000 workers in Vietnam to make up for a shortage of the same number of people in its factories in China. But not everyone can shift production to Vietnam, so Lai predicts that a key consequence of higher Chinese wages will be higher prices. "China is the biggest manufacturer in the world," he said. "If the overall labor cost goes up, the world has no choice - they have to accept it."
.
Economists say there are no signs yet that Chinese products overall are getting more expensive. Chinese exports continue to rise and the economy is surging forward. But the years of massive investment flows into the country are severely straining the country's labor force.
.
The days when you could open a factory near Hong Kong and easily fill it with dirt-cheap workers are over, human resource managers said, especially with a labor shortage of two million people in southeast China.
.
How can a country with 1.3 billion people have a labor shortage? Population experts say factories are seeking a very specific type of worker: young, very mobile, willing to work very long hours and be far away from their families. There are plenty of underemployed people in the Chinese countryside, but most of them do not fit this profile.
.
At the upper end of the pay scale, competition for technical and white-collar talent in Beijing, Shanghai and other industrial areas is so fierce that salaries for certain categories of employees are approaching U.S. and European levels.
.
A Guangdong newspaper last week gave the example of Hu Cai Publishing, which is so desperate to hire a maintenance man that it is offering an annual salary of up to 150,000 yuan, or $18,000, a huge sum by Chinese standards and many times what a professor with a doctorate would earn.
.
"People need to take off the rose-colored glasses and take a hard look at pay levels and benefits - and the total cost that it takes to set up here," said Jessica Pfeifer, a specialist on compensation at Hewitt Associates, a human resources consultancy in Shanghai.
.
.
The labor and skills shortages have spurred debates in the Chinese press, with one article earlier this month in Workers' Daily saying there are "very critical structural problems in the Chinese labor force." The publication of such frank articles is seen as a sign that the authorities in Beijing are worried.
.
"China's biggest paranoia is how it can maintain a competitive position," said P.O. Mak, senior vice president for human resources at GE Consumer Finance Asia. "It's increasingly a serious concern - these rising costs are eating into income. Companies that do not have the scale will be hurt."
.
Yet even companies that do have scale are finding China's eastern coast increasingly expensive. It now costs more for Intel, the computer chip manufacturer, to assemble chips at its plant in Shanghai than at its facility in Malaysia, said a senior manager at the company. To reduce costs, Intel is building a plant outside the central Chinese city of Chengdu, where labor is cheaper but logistics more complex.
.
Other companies are so worried about losing workers that they are trying innovative things to retain them. Epson, the printer manufacturer, chartered 58 buses over the Chinese New Year to take workers from the company's Suzhou factory to their hometowns and then back to the factory once the holiday was over. "The workers appreciated that very much," said Vincent Leung, a human resources executive with the company. "Our retention rate improved by 8 percent."
.
The fact that the labor shortage in southeast China of about two million workers has persisted for more than nine months is leading Chinese commentators to question the very formula that has brought the country its growing prosperity. Economists are debating whether the system of export processing zones, where factory workers travel thousands of kilometers to their workplaces, is sustainable.
.
For years this extraordinary degree of mobility in the labor force was a dream for businesses in China because it meant that factories could cluster along the coast, surrounded by their suppliers and near the container ships that carry their goods to overseas markets. Workers travel for as long as 30 hours by bus or train to these factories and then live in dormitories provided by the factories.
.
Today, managers in southeast China say it is looking increasingly likely that factories will soon have to move to where the workers live - and not the other way around. But this of course is more costly for business.
.
"Sooner or later we'll have to move," said Samson Chan, chairman of the Hong Kong Toys Council, an association of companies with toy factories in southeast China. "But when you talk about moving it always costs a lot of money. You have to start from scratch, make a new building, train new people."
.
Critics say the migrant labor system has helped contribute to low rates of training for workers. A government report on labor and skills shortages released last year criticized the culture of disposable workers, where employers did not adequately train migrants because they knew they might not be with the company in the long term.
.
"There is a practice of using workers but not developing them," said the report issued by the Chinese Labor Ministry.
.
This constant churning in the labor market was reflected in a survey carried out in November by UBS, the investment bank. Employees in southern China keep jobs for an average of 2.1 years before moving on, the survey said.
.
"The system is inherently problematic," said Apo Leong, executive director of the Asia Monitor Resource Center, a group that inspects factory conditions. "There is no guarantee of an abundant supply of migrant workers, especially with this kind of assembly line development."
.
The effects of the shortage are being keenly felt on the ground here in Guangdong Province, across from Hong Kong.
.
Chan of the Toys Council said factory owners were very concerned about the 2005 Christmas season, which normally requires about 20 percent increases in staffing levels and which will begin soon because of the shipping time to Western markets.
.
"A lot of manufacturers are worried that there will be a huge shortage of workers starting in May and June," he said. This is despite salary increases of 25 to 30 percent this year, he added.
.
Chan also said that toys produced this Christmas could be marginally more expensive than those for last year because of labor costs.
.
The labor shortage is sometimes portrayed as a short-term problem that is specific to Guangdong, a province that is disproportionately reliant on migrant workers. But some population experts say that it is related to a demographic shift in China and that the situation could get worse with time, especially if factories keep opening at the current breakneck pace.
.
Dali Yang, a professor of political science at the University of Chicago, predicted in an article that the supply of entry-level, low-skilled industrial workers had started to shrink.
.
Because of the effects of the one-child policy, which was implemented in 1979, the number of people aged 15 to 19 will decline by 17 percent in five years, to about 103 million from 124 million today. That decline of about 21 million people is the equivalent of about four times the population of Denmark.
.
Managers say it is logical that wages will continue to rise if shortages persist. An average worker in a sneaker factory now makes the equivalent of about $100 a month. For some labor intensive factories with tens of thousands of workers, that is too expensive.
.
Dream International, the world's largest maker of stuffed animal toys, said earlier this month that it would hire 6,000 workers in Vietnam this year to fill expanded factories but none in China. The company is operating at 80 percent capacity in China because it cannot find enough workers.
.
Salaries are only part of what employers in China have to pay. One striking difference between China and its Asian neighbors is the high cost of social charges. Sometimes called "mandatory benefits," they include a social security tax, medical care tax and housing savings plan, all of which add up to the equivalent of 40 to 50 percent of an employee's salary.
.
According to Watson Wyatt, a consultancy that specializes in remuneration issues, these nonsalary costs in India equal 16 percent of an employee's salary, in Malaysia 12 percent, in Indonesia 10 to 15 percent, and in Australia 20 percent. "We do emphasize to clients who are coming to China for the first time that China is not a cheap place to do business," said Bob Charles, a senior consultant at Watson Wyatt.
.
These social charges have been around for years and in some cases are capped. But the difference today, Pfeifer of Hewitt Associates said, is that many companies are so desperate to retain top managers that they are increasing other perks.
.
"You need to be offering some supplemental benefits, things like supplemental medical, housing or savings plans - retention focused plans that often are cash-based in the end but put hooks in the organization to retain people," she said. When these types of benefits are factored in, companies are paying an average of an additional 80 percent of an employee's salary in benefits, Pfeifer said.
.
Yet even with the extra perks, many Chinese employees are taking advantage of the high demands for their skills and leveraging job offers.
.
"The reality is that if you go across the street you're going to get 20 to 30 percent higher pay," said Jim Hemerling, senior vice-president at the Boston Consulting Group in Shanghai.
.
An article in the People's Daily this month gave these striking figures: For every experienced skilled worker, there are 88 vacancies, and for every factory technician there are 16 vacancies.
.
The intense competition for workers is reminiscent of the go-go years in Southeast Asia, when similar shortages drove up salaries and real estate prices to levels that eventually led to the collapse of some Asian economies in 1997.
.
Charles of Watson Wyatt said that rising costs in China were unlikely to lead to large-scale moves by the manufacturers to Southeast Asian countries, where total labor pools are considerably smaller.
.
He does not rule out India, however.
.
.
See more of the world that matters - click here for home delivery of the International Herald Tribune.
.
< < Back to Start of Article :hammerhea

[wsuwrhr]

For all of us that bitch?
Like i have said before, our costs are higher because of the standard of living we all have created.
<ramble>
A chinaman lops off his finger in a press or some other machine, hysterical, running for aid which he can't find, he trips on a cord laying across the floor hitting his head and a protruding pole and kills him....dead...laying on the floor.
Think anyone cares? OSHA won't be up anyones ass, looking for how to improve things, no news crews to try and cause an uproar. His family can't sue, no lawyers to take the case.
The workers step over him to continue doing their jobs, for .30 a day, hoping they are included in the 30% raise they read about(if pubic school taught them to read). So now they are are earning .33 cents a day. Damn good
living if your roof is made of leaves, and your toilet is a hole in the ground, if you can even afford a hole in the ground. Shovels are expensive.
Brian

[sorry dog]

For all of us that bitch?
Like i have said before, our costs are higher because of the standard of living we all have created.
<ramble>
A chinaman lops off his finger in a press or some other machine, hysterical, running for aid which he can't find, he trips on a cord laying across the floor hitting his head and a protruding pole and kills him....dead...laying on the floor.
Think anyone cares? OSHA won't be up anyones ass, looking for how to improve things, no news crews to try and cause an uproar. His family can't sue, no lawyers to take the case.
The workers step over him to continue doing their jobs, for .30 a day, hoping they are included in the 30% raise they read about(if pubic school taught them to read). So now they are are earning .33 cents a day. Damn good
living if your roof is made of leaves, and your toilet is a hole in the ground, if you can even afford a hole in the ground. Shovels are expensive.
Brian
Actually, when I left 6 months ago, a freind of mine who runs a laser printer parts factory was paying around 7 or 8 bucks a day.
Unfortunately, the rest is pretty close to what I hear and saw.
I'd say the country folk would move to the city except the infrastructure is way behind...Most have never seen a toilet.
There are many different Chinas and a lot of it is even more 3rd world than Saskatchewon.

[sorry dog]

BTW - I bet Tom Brown would like Chengdu. It's in the middle of Sichuan which has a lot of Buddism. Also, Sichuan food is guaranteed to need no bran assistance.http://www.havasubarney.com/forums/h...-takeashit.gif

[CrazyHippy]

For all of us that bitch?
Like i have said before, our costs are higher because of the standard of living we all have created.
<ramble>
A chinaman lops off his finger in a press or some other machine, hysterical, running for aid which he can't find, he trips on a cord laying across the floor hitting his head and a protruding pole and kills him....dead...laying on the floor.
Think anyone cares? OSHA won't be up anyones ass, looking for how to improve things, no news crews to try and cause an uproar. His family can't sue, no lawyers to take the case.
The workers step over him to continue doing their jobs, for .30 a day, hoping they are included in the 30% raise they read about(if pubic school taught them to read). So now they are are earning .33 cents a day. Damn good
living if your roof is made of leaves, and your toilet is a hole in the ground, if you can even afford a hole in the ground. Shovels are expensive.
Brian
You're shortchanging the poor bastard .06 an hour, that could be the difference between rice for dinner, or rice for dinner... damn :hammerhea
BJH

[HOSS]

Phuc `em all. NO MORE IMPORTS. The US economy would survive. It would stumble HARD but bounce back. The unemployment rate in this country would be non existent. Sure most Americans would lose weight as meanial jobs would not be filled but isn`t that part of what controls illegal immigration? Instead good jobs are lost to illegals daily. Canada looks better every day. That and Australia, Switzerland, Iceland along with the Netherlands.