Firms in China Faced with Tight Supply of Skilled Labor

By Clouse, Thomas | Workforce Management, September 11, 2006 | Go to article overview
Save to active project

Firms in China Faced with Tight Supply of Skilled Labor

Clouse, Thomas, Workforce Management

Rapid economic growth, coupled with myriad cultural and educational factors, make the country a seller's market for managers and other upper-level talent

IN THE THREE DECADES since it opened its doors to the West, China has risen to become the world's fourth-largest economy and its leading manufacturing base. In recent years, the country has laced shortages of steel, concrete, oil and even water as it struggles to maintain its rapid pace of development.

But China may now face one of the most unlikely problems for a country of 1.3 billion people: a labor shortage. As the economy evolves and the demand for skilled workers and business leaders increases, new growing pains in China's labor market are setting in.

Reports of labor shortages first surfaced a few years ago and came primarily from China's southeastern provinces. The issue gained more attention early this year when millions of migrant workers failed to return to work after celebrating the Chinese New Year. Many of these workers remained in China's countryside, better able to carve out a living after the Chinese government abolished agricultural taxes and further liberalized markets for agricultural products.

Others decided to find work in factories closer to home. Government initiatives to develop the country's central and western regions are showing signs of success, as more companies are willing to set up shop in inland areas. Local governments have also offered cheap land, tax benefits and other perks to attract investment. Migrant workers are now able to Find better-paying jobs closer to borne, and companies in the traditional manufacturing areas along China's eastern coast are finding it more difficult to find and keep good workers.

Most analysts agree, however, that the changes in China's unskilled labor force do not really constitute a labor shortage. Economic growth and new government policies have given Chinese workers more options, and some companies have to pay more and oiler better conditions to recruit and retain workers. But the unskilled labor supply is still ample to meet demand.

"The government has been trying to raise agricultural living standards and developing inland areas, so pressure to migrate to cities on the east coast to find a job has lessened a bit. Plus, the pay in some of the factories has been so low that some people found they made more money with farming," explains Tamara Trinh, Deutsche Bank's senior economist for Asia.

"Some firms with relatively low pay in the Pearl River Delta region found themselves short of labor and had to raise their dirt-cheap wages and improve their working conditions somewhat. But with at least ISO million surplus laborers in the countryside and about 10 million new entrants into the labor market every year, I do not yet see the low-skilled labor market tightening significantly in the foreseeable future."

But China still has serious labor problems, Trinh says. "The market for skilled labor is a totally different story," she says. "Skilled and experienced human resources are scarce for many industries and also in banking-especially experienced managers. Those with experience working abroad are best but are also hard to find and expensive."

Evidence of this skilled labor shortage is easy to find. In the annual member survey conducted by the American Chamber of Commerce-People's Republic of China, human resources trumped corruption, government bureaucracy and intellectual property rights to rank as the No. 1 concern lor American firms operating there. Respondents also generally felt the situation was getting worse, particularly in terms of retaining good managers. A survey conducted by HR consulting company Hewitt Associates places the 2005 turnover rate at 14 percent, up from 8.3 percent in 2001. Wages increased by 8.4 percent in 2005.

"The market for labor is hot in China," says Jim Eeiningcr, general manager of Watson Wyatt Worldwide in Beijing, "and it's a seller's market.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Firms in China Faced with Tight Supply of Skilled Labor


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?