October 19, 2004
ON TO AFRICA (via Tom Morin):
Is China Running Out Of Workers?: As farmers stay home, factories scramble for employees. It's all putting pressure on wages (Business Week)
Back in 1989, Taiwanese businessman Hayes Lou moved his bicycle and motorcycle helmet factory from Superior, Mont., to the city of Dongguan, in Guangdong province, China. Over the past 15 years he and his partners have added another helmet factory in Jiangmen, and opened a second facility in Dongguan to make plastic packaging materials. The rapid growth of Lou's business has been made possible largely by one factor: plentiful, dirt-cheap labor, fed by the constant influx into Guangdong of millions of migrant workers from the countryside. Now, much to the surprise of Lou and tens of thousands of other factory owners across China, the endless supply of new workers can no longer be taken for granted. Lou's packaging factory, for instance, is running well below capacity because he has only been able to find 170 of the 300 workers he needs. And even though he has jacked up wages some 30% since the beginning of the year, to an average of $85 a month, turnover is getting worse. "Even when you get an order, you can't produce and ship it," says Lou, who is deputy director of the Dongguan Taiwan Business Assn. "Everyone in every kind of factory is short of workers."It's not just Dongguan that's experiencing a labor shortage. A recent survey by the Labor & Social Security Ministry found that the Pearl River Delta of which the city is a part needs 2 million more laborers. Other major export manufacturing regions, including parts of Fujian province, across from Taiwan, and Zhejiang, bordering Shanghai, are also facing shortages. "It's a serious situation if you're a manufacturer, because now you have got to compete on wages," says Jonathan Anderson, Chief Asia Economist at UBS Securities (UBS ) in Hong Kong. "You can't just put up a sign and expect workers to come knocking. That game is over."
The implication of the labor shortage: sharply rising wages that could push up an inflation rate that already tops 5% on the mainland. That could translate into higher prices for Chinese exports that would push up inflation around the world.
There's always more cheap labor the next country over. Posted by Orrin Judd at October 19, 2004 12:03 PM
At $85/month, their inflation rate has room to grow before it makes them uncompetitive. Africa would not be an ideal place to move manufacturing, its population is widely dispersed, about 400 million people on 11 million square miles of land. It has poor roads and infrastructure, it doesn't have the cultural work ethic that China does, and it's population is dropping due to AIDS. Oh, and its very unstable.
Posted by: Robert Duquette at October 19, 2004 12:44 PMThe roads will find cheap laborers.
Posted by: oj at October 19, 2004 1:06 PMI can see a few countries that are relatively stable and have large urban centers near the coast, such as Kenya, Tanzania, and Nigeria, developing a manufacturing base that will compete globally, but they will not constitute a large enough workforce to be a major competitor in the global market. 400 million is not a lot of people for a continent, and the portion of that population that will be able to compete in the near future is small.
Posted by: Robert Duquette at October 19, 2004 1:20 PMAfrica's population overall is not dropping, their high birth rate accounts for 3% annual population growth, even with the losses from HIV.
Posted by: Eugene S. at October 19, 2004 1:40 PMIsn't this inconsistent?
Last week, China's problem was supposed to be that the farmers were moving to the cities.
And in Africa, you say the roads will find workers, while you say in China they won't.
I remember some years ago watching a documentary on sleeping sickness, a big problem in Africa. A researcher had developed a vaccine that worked but was impractical because it required refrigeration.
In fact, he had to give up his experiments, because he couldn't keep the vaccine cold at his research station in the boonies.
Somewhat later, we discovered that the 'boonies' were 10 miles from the capital of Kenya.
That was a generation ago, but when it comes to basic infrastructure, Africa is about 5 generations behind the Philippines, which is about 4 generations behind China.
Labor in Africa is cheap because it isn't worth anything
Posted by: Harry Eagar at October 19, 2004 1:46 PMRoads will find workers. China isn't building such roads--they're building them from no one to nowhere.
China was cheap in Japan then Korea then China then Indonesia for the same reason. The work's easy. You just need cheap workers.
Posted by: oj at October 19, 2004 1:55 PMOJ,
Yours is the only possible explanation of how you can have a labor shortage and vast armies of unemployed workers at the same time. This is unskilled labor and the Chinese have a couple of Americas worth of unemployed unskilled labor.
But then they still have a top-down command economy in many respects.
Posted by: Bart at October 19, 2004 1:58 PMThe perennial Republican dream: there's always more cheap labor the next country over.
Posted by: Chris Durnell at October 19, 2004 2:47 PMHarry, your story makes no sense. Kerosene and propane refrigerators have been staple items of off-the-grid living for nearly a century. The suggestion that a medical researcher could not have afforded such a device, when generations of poor (by Western standards) missionaries have, is either laughable, or compelling evidence that the researcher was an idiot.
Well, he was an African (though white) researcher.
Posted by: Harry Eagar at October 20, 2004 2:21 PM