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Vietnam and China. Labor Shortages Or Not?

By Dan Harris and Steve Dickinson

I ain't gonna work for Maggie's brother no more No, I ain't gonna work for Maggie's brother no more Well, he hands you a nickel He hands you a dime He asks you with a grin If you're havin' a good time Then he fines you every time you slam the door I ain't gonna work for Maggie's brother no more ---Bob Dylan I have been hearing of labor shortages in China since forever and though there no doubt is a shortage of skilled and managerial labor, I have always found it hard to believe there is such a shortage of factory workers. I have always believed that if the factory owners paid more, they would have plenty of workers. I have always seen "labor shortage" as just a far too convenient excuse by Chinese factories for failing to deliver their product on time and for seeking to increase their charges. But two different conversations over the last couple of weeks are causing me to doubt my own analysis. The first was with a client who makes furniture in Vietnam in his own factories. He told me he has been having a real tough time getting workers for his factories, even though he insists (and I believe him) he pays above market and does whatever he can to make his factories a good place to work. He said that the problem in Vietnam is that living in the countryside is not that bad and that after a year or so in the factories, many workers decide to return to their farms back home. He admitted that if he were Vietnamese, he would rather live a bucolic existence with low wages than work in a factory for higher wages. He said "it's not like China here. I've been to some of the villages where my workers come from and though not much is happening in those places, it certainly isn't grinding poverty either." Then just yesterday, another client told me a similar story regarding his China factory. He said he was paying above market wages and doing what he could to make his factory a good place to work, both short and long term. He said that despite this, he was losing more workers each year to their hometowns. This guy has two factories (neither in Guangdong Province) and he claims he is losing workers not to factories closer to his workers' hometowns, but to the hometowns themselves as more and more workers are deciding they can lead better lives not working in factories at all. He said that as China continues to improve the life of its rural citizens, we are only going to be seeing more of this. What are you seeing out there?

Full post as published by China Law Blog on May 13, 2010 (boomark / email).