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NO. 11 MARCH 18, 2010
Newsletter> NO. 11 MARCH 18, 2010
UPDATED: March 14, 2010 NO. 11 MARCH 18, 2010
Where Are the Workers?
Labor shortages in the Pearl River Delta will increase overall labor costs as migrant workers raise their expectations for pay and work-related benefits
By LAN XINZHEN
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Positive effect

CLOSE TO HOME: A company in Jiujiang, central China's Jiangxi Province, recruits workers at a job fair on February 24. Local companies, offering equal salaries to those in China's east coastal region, are becoming more attractive to job hunters (HU GUOLIN)

Cai Fang, Director of the Institute of Population and Labor Economics of the Chinese Academy of Social Sciences, thinks labor shortages may do more good than harm, because it can promote a transformation of China's economic growth model.

Increases of labor costs will have a considerable impact on foreign investment and export competitiveness. "The productivity and core competitiveness can be increased and huge risks from the exhaustion of the demographic bonus avoided as long as we achieve technological progress and industrial upgrading," Cai said.

As a critical production factor, labor has been the primary contributor to China's continual economic growth. Over a long period of time, with abundant labor supplies, Chinese companies gained advantages on domestic and foreign markets with cheap labor-intensive products. The abundant labor resources and cost advantages allowed China to become a world factory and engine of world economic growth.

According to World Bank estimates, demographic bonus advantages contributed more than 30 percent to China's high economic growth. However, China has formed an economic growth model that depends too heavily on labor and capital.

The present labor shortages are a warning that cheap labor, with low salaries, inefficient welfare, a lack of social security and poor skills, has been rejected by migrant workers. "The export-oriented economic growth model based on cheap labor has to be modified," said Cai.

Industrial upgrading and technological progress will impose higher requirements on workers, hence increasing investment in education and training is key coping with labor shortages, Cai said.

Transforming the economic development model has been prioritized as a key point of economic work this year, and industrial upgrading is a must. "Companies should take the initiative, rather than being forced, to promote industrial upgrading," Cai said. "They should not return to the old way just because the orders are increasing after the economic recovery."

Labor-Related Survey

To size up the situation between labor demand and migrant worker employment, the Ministry of Human Resources and Social Security carried out a survey among 3,239 companies and 9,081 migrant workers from 26 large and medium-sized cities and 90 counties before the SpringvFestival. The results were published on February 25. Edited excerpts follow:

- Labor demand rose 15 percent compared with last year. Among the surveyed companies, 70 percent say they expect some difficulty in recruiting workers this year.

- Labor demand in the eastern areas continues to grow, with every company planning to recruit 156 workers on average, almost identical to the same period last year. Labor demand in the central and western areas is increasing markedly, with every company planning to recruit 61 workers on average, 16 percentage points higher than the result of the previous survey.

- Companies estimate they will have to provide a 9-percent increase to average salary figures for employees. Migrant workers expect an increase of more than 14 percent in 2010.

- Among returning migrant workers, 62 percent clearly stated their intention to look for work outside their hometowns after the Spring Festival, 6 percentage points lower than the previous year. Thirty percent of returning workers said working conditions would determine if they returned to coastal areas to work, also 6 percentage points higher. The remaining 8 percent said they will not look for work outside their hometowns, mainly because the salaries are too low or they are preparing to start a business in their hometowns.

Among those who are looking for work, 74 percent are going back to their former companies. Others will not, due to low salaries, long overtime hours, no prospects for advancement or a lack of opportunities to learn new technologies.

(Source: Ministry of Human Resources and Social Security)

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