China’s Migrant Laborers Enjoy the Downturn, take a Year in the Countryside

I spent the first half of November on assignment in Guangdong Province, and though I can’t say too much about what I was up to down there, I did come across some interesting labor-related items unrelated to my assignment.

So. In the space of two weeks I managed to visit 11 factories tightly connected to the export manufacturing sector (either as direct exporters or as raw material suppliers to exporters), and interviewed another dozen. No surprise, all but one conceded that business is down from 2008 – in most cases, between 30% and 50%. At the same time, there was near universal agreement that the numbers would be far more grim if not for China’s economic stimulus which – according to several participants – is directly accounting for some 60% of the economic activity in Guangdong – the famous/notorious export “workshop of the world”- at the moment. What does that mean, precisely? One example: below, at a factory ordinarily devoted to manufacturing electrical equipment for export industries, workers instead hand-assemble electrical transformers for government hydro-power projects.

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Good for China: the stimulus is working. Now the surprising parts. First, wages are way, way up. On average, workers in the unskilled and semi-skilled workplaces I visited were commanding salaries in excess of RMB 2000/month (US$294.00), with several factory managers telling me that the current range is RMB 2000 – RMB 3000 (US$291 – US$437). That may not sound like much to my readers in the developed world, so two notes: a) that’s more than double the wages you’d find in those same industries even two years ago; and b) those kinds of salaries are roughly equal to starting wages for Shanghai area office workers.

So what’s going on here? Why are China’s migrant laborers enjoying a significant hike in their value during a global downturn that devastated Guangdong’s export industries? At factory after factory, I received roughly the same answer. Here, loosely transcribed, is the version I received at the electrical transformer factory, which is desperate to add 200 workers to the 700 who it currently employs:

When our workers went home for Chinese New Year in February we didn’t have any work for them. So we told them to call us after their holiday and we’d tell them when to come back. They called in March and we told them that there’s nothing for them to do and they should stay home. Then in July we started to have more work and we called them and asked them to return. Many of them said that they had decided to take a one year holiday, and wouldn’t come back until after the next Chinese new year [February 2010]. We call every week now, but they won’t come back.

Over and over, across Guangdong, I heard the same story: migrant workers laid off in February have chosen to stay home until February 2010. The result is a serious labor shortage, with many factories sending managers to migrant villages with bonuses and other enticements (like higher wages) designed to attract workers back to the factory floor – without much success. It’s not the only reason that Guangdong’s unskilled and semi-skilled wages are moving up, but it’s widely cited as the most important and immediate reason.

I mentioned this to a knowledgeable friend yesterday afternoon, and his response, I think, was quite apt: “The fluidity of this labor market is beyond our comprehension.” Indeed! It also suggests, I think, a couple of other phenomenon. First, the cost differential between living in the Chinese countryside and the Chinese urban core. Now, I don’t doubt that China’s migrants have saved their salaries, but I do doubt whether they could live as comfortably in, say, Dongguan (on those savings), as opposed to their home villages.

On the flip side, I also can’t help but wonder what’s going to happen to Guangdong’s labor costs after those one-year vacations come to an end in late February. Will there be enough jobs to hire everyone planning to return? At the moment, there’s little reason to believe that consumer demand in the developed world is going to be close to what it was 18 months ago. So, at least in the short term, job growth down there is going to be tightly connected to the government stimulus.

Finally, a nice Andrew Batson piece on China’s employment situation in today’s WSJ.

4 comments

  1. One more reason that Beijing can’t afford to float the RMB. Government stimulus projects can afford wages like these but exporters are totally screwed by them.

  2. The labor cost started moving up even before the recession last year. That’s the new reality of China but I sure hope you’re right that people are going to move back to GZ after CN new year. Lot of people down there could use the price break.

  3. Hey Zach – First, i owe you an email and a get-together. As for the comments on the Obama post – I generally close comments on posts that link to articles that I’ve published elsewhere, particularly if those venues have letters-to-the-editor, discussion forms, etc. Since they pay for the content, I feel that they’re entitled to any related discussions and responses – and not me.

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