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With various reports touting China's economic slowdown,
China still experienced a 7.6% growth in the second quarter of
2012. While this may indeed be a decrease from China's historic
double-digit growth, it is still far ahead of any other country
(i.e., U.S. +1.4%; Britain -0.2%; India +5.3%; and Brazil
+0.2%). Thus, there remains strong incentive for companies to
start operations in China with its initial lure of low labor costs
and seemingly endless labor supply. However, in light of the
rapidly changing Chinese labor environment, it is important to
understand some facets about the Chinese workforce.
China has an enormous "floating population,"
consisting of people migrating from the countryside to the cities,
from underdeveloped areas to developed areas, and from central and
western regions of the country to the eastern regions. In search of
jobs and higher wages, these migrant workers constitute much of the
workforce in manufacturing, construction, and social services
industries. Migrant workers are generally paid lower wages, endure
long overtime hours, work in poor or unsafe working conditions, and
are frequently owed back wages by employers. However, it is this
migrant group that has been the key component in making China's
labor costs nearly unbeatable.
In 2008, the Labor Contract Law was introduced to ensure that
full-time employees had written contracts and severance pay
entitlements. The Law on Mediation and Arbitration of Labor
Disputes was also introduced to streamline the system of
arbitration and lawsuits. Although strict enforcement of these laws
is still lacking, labor dispute cases increased from 407,000 in
2005 to 1,287,000 in 2010. If anything, these new labor reforms
have brought a new level of awareness to workers of their
rights.
The New York Times recently reported that cities across China
are facing serious labor shortages because it has been increasingly
difficult for employers to bring in new migrant workers and retain
the current ones. Some companies give employees bonuses for just
coming back to work from extended time off during the Spring
Festival, when many migrant workers return home. Others offer cash
for every new employee that migrants bring back to work with them.
In many areas, wages are increasing from 10 to 30 percent. A myriad
of reasons for this include rising costs of living in urban cities
coupled with improved in conditions in rural areas encourage many
would-be migrant workers to look for jobs closer to home. Also, as
evidenced by the significant increase in labor dispute cases as
well as a rash of factory strikes, China's employees, both
those new to the workplace and current workers, are less willing to
endure labor hardships as their predecessors did. The days of
unbeatable low labor costs in China may be drawing to a close.
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