China: Labour Shortage Issues

Posted in China on Wednesday, 11 January 2012. Print

Needs more experts, skilled workers & professionals

China: Labour Shortage Issues

Factories in the Pearl River Delta are facing labour shortage in recent years. In fact, most of the eastern coastal regions are facing the same problem as well. These factories are unanimous in response to industrial restructuring and upgrading to high-value-added industries.

 

Hidden Workforce
According to a statistics compiled in 2008, among the 700 to 800 million working populations in China, 480 million are farmers. This figure is almost three times the agricultural population during the peak of the industry in 1957.

Considering a decrease in cultivated areas and an improvement in agricultural machinery, pesticides and fertilisers, 100 million agricultural population is more than enough.  The remaining 200 to 300 hundred million working populations can be allocated to other industries.

In small towns, registered unemployment has already mounted to more than ten million, whereas the number of people being laid off is estimated at several tens of millions. Currently, there are approximately 200 million unemployed populations in cities and towns (taking middle-aged population into account).

Hence, according to statistics, there should not be any labour shortage.

Shortage or Surplus
Labour shortage is reported prevalently in China. Let’s look at what is really happening.

In the Pearl River Delta and eastern coastal regions, companies complain about labour shortage. This happens only because they recruit just younger workers. According to record, 60 percent of the employees in the eastern coastal regions are 35 years old and below. None of the 40 to 50 year-olds in the region is newly recruited. As time passes, the middle-aged population accept the fact that they are not wanted, and retire prematurely.

Life expectancy in China is increasing alongside with the development of the economy, healthcare and medical care. Following that, retirement age should be extended. Current retirement age in Singapore is 65, and is expected to extend to 68 in a few years (the European Union plans to extend the retirement age to 69). If the retirement age in China is extended according to its increased life expectancy, China would have:

Year
Working
Age
Working Population
No. of New
Employment (per annum)
2010
15-59
900 million
5 million
2020
15-64
10000 million
4 million
2030-2050
15-69
900 million
3 million


If employers are willing to recruit middle-aged or senior workers, they would not have to worry about labour shortage.

Labour Surplus
China’s economy is slowly switching away from agriculture. A labour surplus will be observed. There is no room for development for labour-intensive industries.

In 2010, furniture industry in China exported US$40 billion worth of goods. That was 40 percent of global furniture trade. The other industries attained even better results - footwear export was 70 percent of global trade, cameras 50 percent, watches 80 percent, mobile phones 60 percent, etc. In short, labour-intensive industries in China, made up mostly of manufacturing industries, are quite matured.

In addition, with competition from other populous countries like India and Indonesia, there is no room for development for labour-intensive industries like ready-made clothes and cotton cloth industries.

Low productivity industries do not make good use of labour force. Today, China’s economic dimension is equivalent to one-sixth of the sum of the US, German and Japan. China has three times more labour force than the sum of the three countries, but the country’s productivity is merely six percent of theirs.

In furniture industry, Japan was ten times higher in productivity several years back, and currently they are still seven to eight times higher than China’s.

Instead of complaining about shortage of experts and excess in manual labour, enterprises should make an effort to increase their productivity. Chinese workers are no less talented or capable. With relevant training, meticulously planning and execution of smart business ideas, production method and design can improve productivity of workers.

High-Value-Added Industries: THE ANSWER?
Is high-value-added industries a solution to China’s shortage of experts and excess in manual labour? First of all, let’s look at what are high-value-added industries. Is the production of electronic merchandises a high-value-added industry? No. The production of television and computers are simple assembly industry, even simpler than furniture production. Obtaining patents for electronic components is a high-value-added industry.

When high-value-added industries are planted and executed carefully, they can solve many problems pertaining to workforce issues. Take Japan, for example. Their economic dimension is similar to China, but they have only 60 million working populations. America is another successful example. Their economic dimension is two to three times of China, with only a hundred million working populations.

However, without experts, without accumulation of and innovation in technology, advocate for high-value-added industries does not work. Moreover, high-value-added industries are not related to manual labour. Take Sino Huawei Technologies as an example. They employ only university graduates, believing that they are more professional.

Different from aforementioned nations, China has 700 to 800 million strong workforce. That is a huge number. As the population ages, China will need an even larger workforce. Therefore, China should not do what the other countries do; advocate what the other countries advocate. China should be aware of her own problems.

Today, China is short on experts, but has an excess of low skill workers. High-value-added industries cannot solve all the problems for China. We are in need of more experts to increase productivity. At the same time, we shall not give up labour-intensive industries like the furniture industry which provide low-skill manual workers with job opportunities.


Advertisement

Banner
The International Alliance of Furnishing Publications (IAFP) is an association of the foremost trade publications from each country, based on quality editorial content and on circulation.
{column_width:30,column_count:24,column_gutter:10,subcolumn_count:0,align:'center'}