Labour Shortages Hit China
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A startling report from Monash University indicates internal migration controls are causing labour shortages in high growth Chinese provinces and leading to a conclusion that the days of cheap labour are over in the world’s most populous country.

According to the latest issue of Monash Business Review foreign businesses in China are being told to raise wages and improve conditions for rural workers flocking to the big cities or risk shutting down production.

Sijun Shao, a doctoral candidate in the Department of Management at Monash University, said rural migrant labourers were evolving into “homo economicus” – economically aware workers with a new-found self interest who responded to incentives. This new type of worker would lead to the reform of China’s labour market, he said.

“With its new-found confidence, understanding of workers’ rights and the appreciation of the values of their labour, homo economicus is causing difficulties for foreign investors and multinational organisations recruiting cheap labour.

“And with reports beginning to surface of a severe labour shortage in China, multinationals operating in China need to beware,” he said.

Although many believe China to be a bottomless supply of industrial workers, a government investigation in 2004 concluded that Guangdong province was about one million workers short.

Despite the fact that 150 million rural Chinese have moved to cities in search of work since 1978, migration from the rural to the urban sector has been largely constrained by China’s hukou residential registration system, introduced in the 1950s.

“Foreign businesses in China have two choices – raise the level of wages and become attractive enough for migrant workers, or relocate to the central and western hinterland regions where labour is cheaper,” Shao said.