Labour Supply After Chinese New Year

Chinese job seekers at a recruitment fair

Chinarecruitment.jpg

Imaginechina/Rex Features

 

By John Richardson

As petrochemicals markets begin to slow down ahead of the Chinese New Year, which this year falls on 10 February, a lot of attention is, as always, being focused on the likely strength of demand after the holidays.

The hope is that a recovering US economy, a Eurozone that looks a little more stable and stronger domestic growth in China will combine to result in another surge in buying activity.

But to what extent might shortages in labour supply once again limit the ability of petrochemicals end-users to ramp-up production post-Chinese New Year?

Last year, we were told by a polyolefins industry source that what he had been anticipating for three years finally came true: Labour markets going beyond the tipping point as tens of thousands of migrant workers failed to return to their jobs in the big export-focused manufacturing plants in eastern and southern China. This was the result of a long-running central government policy of narrowing the income gap between rural and urban China.

Numerous statements have been made by China’s new leadership about the need for more balanced economic growth, including boosting rural incomes. 

Even if new measures haven’t already been put in place to further narrow the income gap between China’s country and its big cities and towns, the perception amongst migrant workers and their families must surely have strengthened that things are about to change for the better.

As holidays are a time for reflection, the migrant workers who do return to their jobs in the export-focused factories might also carry back with them demands for better pay and working conditions, as they know that supply and demand is on their side.

In 2012, the number of working-age people in China decreased by 3.45 million to 937.27 million, Ma Jiantang, director of the National Bureau of Statistics (NBS) said last week.

The decline in China’s “demographic dividend” – the growth in its working-age population – is the result of the country’s one-child policy.

Government policy has already greatly improved pay and conditions in eastern and southern coastal factories, perhaps adding to the sense of entitlement.

For example:

*”Pay and benefits for the average Chinese factory worker rose by 10% a year between 2000 and 2005 and speeded up to 19% a year between 2005 and 2010, according to the Boston Consulting Group,” writes The Economist in this article.

*”A new labour law introduced in 2008 brought in more protection for workers, including the right to a permanent contract after a year of employment.

The workers who do return from the countryside might be even more prepared to down tools.

“Strikes are becoming more frequent, and when they happen, says one executive, the government often tells the plant manager to meet workers’ demands immediately,” adds The Economist.

“Following labour unrest, wages at some factories have gone up steeply. Honda, a Japanese carmaker, gave its Chinese workers a 47% pay rise after strikes in 2010,” adds the magazine. 

“Foxconn Technology Group, a subsidiary of Hon Hai Precision Industries, a Taiwanese firm that does a lot of manufacturing for Apple and other big technology firms, doubled pay at its factory complex in Shenzhen after a series of suicides. Its labour troubles are still continuing.

“One consultant jokes that it is getting as hard to fire people in China as in France.”

If labour costs go up post-Chinese New Year, more coastal factories could close down, increasing the pace of migration of low-value manufacturing to inland China, or to other countries such as Vietnam and Bangladesh.

Quality issues, resulting from the tight labour markets, might further damage of the viability of China’s coastal manufacturers.

“China’s labour market is so overstretched that all the high-quality labour has been exhausted, you have to hire people with lesser qualifications, and then quality becomes a problem,” Alain Deurwaerder, who until recently ran a factory in Thailand for Ducati, an Italian motorbike-maker, told The Economist in the same article

Another European chief executive complained about the long-running problem of the flightiness of his Chinese workforce, the magazine added.

“If someone on the other side of the road offers 5% more pay, they go,” said the chief executive.

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