The Law of Supply and Demand is alive and well in China today. China’s
supposed never-ending supply of cheap factory workers is drying up.
Retention is becoming a serious problem for companies in China. Wages and
benefits are increasing. Employers are facing a shortage of labor. Their
responses to these issues will have important implications locally and
globally.
Peter Cappelli, director of the Center for Human Resources at The Wharton
School, recently returned from spending a month in China. He found a labor
market in transition. Not surprisingly, factory work in China is not
high-status. Companies wanted to find people to work at low wages in their
factories located in the East; they recruited people from rural areas of
western China, where there were limited work opportunities.
Up to this point, Chinese employers have not treated their employees very
well, because they did not have to. There has always been a line of people
waiting for work.
About two years ago after the Spring Festival (an unpaid month-long
adjustment to workers’ desires to visit home), it started becoming slightly
more difficult to retain workers. Apparently, some people did not come back
to work after their breaks. In reaction, employers sent representatives to
workers’ villages, distributing presents and money to encourage them to come
back. In addition, raising wages had no effect on retention, because
everybody was doing it.
In the past, when workers did not return to work, employers just hired new
ones. Now, companies are finding more and more workers coming back later and
later, because they know there will be vacancies. If they do not go back to
work for their previous employers, they know there will be other companies
more desperate to hire them, after operations have resumed.
Returning employees are now checking all the factories in their areas to see
what wages the other companies are offering. Moreover, Chinese companies are
also paying hiring bonuses, only they call them “switching fees”. Chinese
employees are clearly in the driver’s seat.
Our forecast: expect to see a major shift in the way employers treat Chinese
workers. These employers will “add value” in ways that will be meaningful to
their employees and it will not be just money. Improving living and working
conditions, training supervisors and managers, offering career pathing, and
even directly supporting families back home are but a few ways we can expect
to see employers adding value. The challenge will be to continue to keep
prices low as well.
Special thanks to LRP Publication’s Human Resource Executive Online for
publishing Peter Cappelli valuable insights from his recent trip to China.
Source: Joyce Gioia is a Strategic Business Futurist and Professional Speaker.
For more information, visit http://www.hermangroup.com/joyce.html.
Or to sign up for The Herman Trend Alert at http://www.hermanTrendAlert.com
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