To China's migrants: Stay west, young man

Christian Science Monitor: To China's migrants: Stay west, young man

Rising wages on China's more prosperous eastern coast are pushing some factories inland where labor is cheap.

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Mr. Song is part of a gathering trend that is making it ever harder for coastal enterprises – the engines of China's economic growth – to attract the migrant workers they need. The shift follows nearly a decade of government incentives to develop its impoverished inland.

Pushed by unsatisfactory wages and poor conditions on the coast and pulled by new job opportunities inland, millions of Chinese workers are turning their backs on the sweatshops that have symbolized China's manufacturing miracle for the past decade.

"There is now an opportunity cost attached to leaving the countryside," says David Kelly, a senior research fellow at the National University of Singapore. At the same time, he says, strict residency rules that deny migrant workers the social benefits that city dwellers enjoy also deter many from leaving home.

The result: More than half of employers in Guangzhou and surrounding cities in the Pearl River Delta reported that they were 25 percent short of their full employment goal last year, according to a recent study by the Ministry of Labor and Social Security. A study earlier this year by the State Council, China's cabinet, found that 74 percent of the villages surveyed no longer had any surplus laborers available to work in distant cities.

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All this is posing problems for coastal manufacturers who have built their export-oriented business model on the foundations of abundant cheap labor.

Low-tech industries, which are internationally competitive only because their labor costs are so low, have little wiggle room to raise wages in order to attract migrant workers from the interior.

Bad news for the companies, however, is good news for migrant workers.

"Increasingly, migrant workers are finding they don't have to leave home to make a living," says Mr. Munro. "This is a trend that is clearly emerging. They've got more options now."

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A portion of wage increases can betraced to a shortage of laborers, which has forced some companies toraise wages or find other ways to attract talent. But there is no signthat companies are willing to flee China's prosperous coastline forpoorer countries like Vietnam and Cambodia to find relief from thehigher wage level.

"Other developing countries havemuch worse infrastructure [ports, roads, power plants, and access tointernational markets] than China. So any gains from wage savings willbe lost due to poor infrastructure," said Minxin Pei, the director ofthe China Program at the Carnegie Endowment for International Peace inWashington.

Comments

[Rob]

There is no reason for companies to flee China for other countries, since there are, in essence, many layers of China. My company in China has a plant in a costal city and another 3 hours inland. The wages 3 hours inland were 1/3 of the wages in the costal city when I was working there. If you didn't keep up with wages, the workers you spent a year training were next month working for the new factory across the street.

The people I know who are starting factories in China, and helping others start factories, have been moving inland for the last 5 years. As wages rise, it's inland to the next city for the next factory. The best start greenfield factories.

I figure you've got another 8 layers or so of China before you have to start looking to other countries.

[Michael W. Kruse]

Interesting, Rob. I posted a link to an article back in Jan. from The Economist The problem with Made in China. That article also suggests going inland as a solution. It seems the trade off is higher transportation costs for goods in order to access the cheaper labor. Other nations have more accessible cheap labor but with poorer infrastructure at costal cities. Sound like everyone is spurring everyone else on to growth.

What industry are you in?