Shanghai Scrap

Over the last month I’ve spoken to several Chinese factory owners who claim that their biggest challenge is the rising price of skilled and semi-skilled labor. In Tianjin, for example, two separate owners told me that the price of skilled machinists had risen 30% over the last year to roughly RMB 3000 (US$378) per month. New trainees can expect to be paid roughly RMB 1000 (US$126) – and factory owners can expect to lose them to higher paying employers within weeks. One owner complained that rival machine shops post recruiters outside of his factory gates, offering higher salaries. (to which I say: good for the machinists).

Above, a photo of a very modern Tianjin machine shop outfitted with Chinese copies of American and European CNC machines. According to an American machine shop owner from the Midwest with whom I am friendly, the cost of running such a machine in the US is roughly US$2000 – US$2500 per employee, per month (including overtime). In China, unlike the US, machines shops generally assign two machinists to a CNC, and thus – as of late – skilled manufacturing costs in Tianjin are approach one-third of those in the United States. That may not seem like much, but – when shipping and all of the trouble of supervising Chinese quality is figured in – it’s high enough to make US-based manufacturers think about going elsewhere – or home. Which is what was on the mind of the owner of this factory when we discussed the price of Tianjin’s labor. “I don’t know what we’ll do if the price goes up much more,” he told me. “We’ve lost the margins that brought people here.” In the midst of this conversation, I paused beside a window facing the machine shop’s backyard, and saw this scene:

In case the photo isn’t clear: eighteen employees were spending the day (or two) cutting the dry grasses behind the machine shop by hand, using scythes and pocket knives. When I pointed out to the machine shop owner that a power mower could have finished the job in an hour, he replied that it was cheaper to send his company’s army of low [no]-skill employees after the problem. Unfortunately, he was unwilling to reveal the cost of the human lawn mowers – or the cost of renting/buying a power mower.

In either case: one more example of the widening income gap between China’s skilled and unskilled workforce (I’m assuming it’s cheaper to buy a power mower than to send an army of skilled machinists after dead grass). This is a topic that’s been covered elsewhere, of course, but typically it’s covered in terms of the income gap between urban professionals and rural farmers. This, I think, is a more significant gap, and one that deserves deeper consideration.

[Addendum: Does anybody happen to know what it costs to rent or buy a power mower in Tianjin?]