Foxconn And China Demographics

Foxconn.jpgSource: http://www.engadget.com/2012/09/23/foxconn-taiyuan-riot/

 

By John Richardson

THE riots and a strike at Foxconn factories in China point to demographic changes that have major implications for the country’s economy.

China’s one-child policy means that it can no longer depend on a constant flow of compliant workers from the countryside prepared to accept exhausting and monotonous working conditions, says David Pilling, in The Financial Times.

According to the Asian Development Bank, between 1975 and 2005 China’s working-age population nearly doubled from 407 million to 786 million between 1975 and 2005, according to the Asian Development Bank.

“The actual leap in productive workers was greater still, since the population surge closely coincided with Deng Xiaoping’s economic reforms, which released tens of millions from the countryside to work in urban factories,” adds Pilling.

“That turned people who had been surplus labour on inefficient farms into productive members of the global workforce.

“The good news is that this massive increase in labour input goes a long way to explaining China’s remarkable 30-year growth record.

“The bad news is it’s over. China’s population has been ageing since 2000, according to UN definitions. From 2015, when the working-age population will start to shrink, the demographic dividend China has enjoyed for so long will crank into rapid reverse.

“This is all happening much quicker than in other countries that trod a similar development path. Yolanda Fernandez Lommen, in a 2010 ADB working paper, calculates that China started ageing when its real per capita income was $4000. That compares with $14,900 in Japan and $16,200 in South Korea.”

As China ages before it becomes rich, the horrors of selective-selective abortion have created another workforce problem (Dudley Poston, a sociologist at Texas A&M University, says that 160 boys are born for every 100 girls. The natural gender balance at birth is 105 boys for every 100 girls).

“A sea change is rippling through many Chinese factories. A workforce once dominated by women is now increasingly male,” writes the author of The China Price, Alexandra Harney in this Bloomberg article.

“China’s one-child policy chips away daily at its competitive advantage in manufacturing for export, first by choking the supply of labour of both sexes, then by restricting the flow of women into factory jobs. The result is a more restive male workforce, frustrated by crude management,” adds Harney.

“Chinese parents, wealthier today than a decade ago and wiser about the risks of sending a teenage girl alone across the country to work, are less inclined to steer their children into factory jobs.

“I have met young Chinese women in countryside towns – where a decade ago most girls would have done at least one turn in a coastal factory – who say that ‘our generation doesn’t work in factories.’

“Nor are their parents as impressed by a prospective husband for their daughter if he works in what many see as a dead-end factory job. Professor Poston estimates that 40 million Chinese men may never find a wife. Less-educated, lower-income men struggle the most.”

These men, wired to the outside world and therefore acutely aware of their relative poverty, are becoming restive – hence, the Foxconn protects and their willingness to take to the streets during the recent protests against Japan.

China’s new leadership, when it is eventually in place, must tackle the corruption and nepotism that is a further source of resentment in the country’s factories – i.e. that promotion is based on “who you know, rather than “what you know”.

And if China is to avoid major social unrest, and escape the middle-income trap, more money and effort needs to be devoted to training workers so they can progress to higher-skilled and more rewarding work.

But can this happen, given that “vested interests” might well result in the forces of conservatism winning the current leadership struggle?

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