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Pressure to ease labor shortage spurs pay hike

To entice and retain workers, Guangdong is studying how much to raise minimum wage levels in the province. Makers, hard-pressed to keep costs low, prefer to improve living conditions instead.

The upcoming Chinese New Year holiday calls to mind problems associated with the annual event—long lines at the bus and train stations, stranded passengers, and factories wondering whether their workers would come back.

Pressure to ease labor shortage spurs pay hike

Manufacturers in Guangdong, in particular, are worried. The province has become one of the most expensive places in China for a migrant worker to live in. Although its minimum wage is the third-highest in the country, many workers have deemed it better to find jobs in the Yangtze River Delta region. The cost of living in Zhejiang province, for instance, is slightly lower than in Guangdong. Plus, the basic pay is higher.

Since wages are not as competitive, Guangdong's suppliers are concerned this year's holiday will result in another severe labor shortage. This is especially troubling because many factories in the province are still trying to fill positions that have remained vacant since the 2010 Chinese New Year festival. Moreover, a large number of companies have reported workers resigning to go back to their home provinces as early as December.

Because of this, some of the bigger manufacturers are 500 to 600 hands short. Such businesses now have to assign office employees to the production lines at least once a week to help finish all orders before the holiday starts.

Guangdong mulls minimum wage hike

To ease the pressure from the anticipated labor shortage after the Chinese New Year holiday, Guangdong is now considering raising the minimum wages this year. How high the current levels will be lifted, however, depends on what the circumstances will be after the festival.

Among the factors to be considered are the labor shortage situation, the minimum wage levels at other provinces and how much local companies can afford to dole out monthly.

But while increasing the basic pay could retain some migrant workers, doing so is not likely to stem the movement away from the Pearl and Yangtze River Delta regions and to the inland provinces.

Last year, 30 provinces and municipalities raised minimum wage levels, many by more than 20 percent. After the adjustments, Shanghai still offers the highest basic pay at 1,120 yuan per month, followed by Zhejiang at 1,100. Guangdong is third with a 1,030 yuan monthly minimum salary.

This came as the National Bureau of Statistics showed the eastern provinces had 8.9 percent fewer migrant workers in 2009, at about 90 million. In contrast, the western provinces saw a 35.8 percent increase in the number of migrant workers in the area, exceeding 29 million.

But higher wages in the east did not stop migrant workers from flocking to the west. This includes Chongqing, one of a handful of provinces and municipalities that did not raise salary levels in 2010. Despite the nominal pay, many workers opted to find jobs in Chongqing, where living costs are significantly lower. The municipality is a lot closer to migrants' hometowns as well, saving workers time and transportation expenses. And while Guangdong is still mulling over how much to raise minimum wage levels in the province, Chongqing increased monthly salaries from 680 to 870 yuan beginning January 1.

Raise living, social conditions not monthly pay

Most manufacturers in Guangdong do not intend to increase worker salaries, unless mandated by the provincial government. With major raw material outlay, inflation and the CPI index on the rise, suppliers would rather look at various ways to keep costs at a manageable level. Should the local administration decide to raise the minimum wage anyway, makers prefer to do so after the spring festival, when workers start returning to the factories.

Although the minimum wage in Shenzhen, one of the key manufacturing cities in Guangdong, is 1,100 yuan per month, a typical worker at an electronics factory can take home as much as 3,000 yuan. To supplement their basic pay, many render as much as 8 hours worth of overtime work every day. Most factories in the city provide free lodging and meals are relatively inexpensive, at between 1 and 3 yuan per meal. But workers also have to send money back to their hometowns and still have to spend for clothes and medical expense. Others want to have some extra money to further their education as well.

But while factories want to maintain a stable workforce to ensure steady production and delivery, they cannot raise wages constantly. A 100 to 200 yuan increase may not contribute much to a typical worker's take-home pay. But to a 3,000-worker factory, that translates to a 300,000 to 600,000 yuan extra expense per month or 3.6 million to 7.2 million annually.

Further, increasing the minimum wage is no guarantee that workers would stay and not head elsewhere.

For most companies, the preferred option is to improve workers' living and social conditions instead of just raising the basic pay. Some large makers have set up dining halls where inexpensive but tasty meals are available for all workers. Others disburse funds workers can use to watch football or basketball games, or go around the city on their free days. A few suppliers also provide training for workers who want to move out of the production lines and into warehouse management, QC or sales.


Note: This article "Pressure to ease labor shortage spurs pay hike" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.

All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.

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