Taiwanese Firms Suffer Labor Shortages in China

Good news: The global economy is in recovery, and orders are flooding into manufacturers. Bad news: Taiwanese-invested companies in China are having trouble filling the increase in demand because of a serious labor shortage that afflicts the coastal provinces of China.

At a seminar on investment in China, held in Taipei on Feb. 21, president Chen Min-chang of the Management Institute in Taipei, which organized the seminar, said that Taiwanese companies in China are facing average labor shortages of 30-40%.

At a party held for Taiwanese businessmen in China the following day by the Straits Exchange Foundation, Yeh Chin-jung, chairman of the Taiwanese Chamber of Commerce in Dongguan, lamented that “The crisis triggered by the labor shortage may be even more serious than the global financial tsunami.”

Many Taiwanese companies operating in China’s coastal provinces are finding it hard to rehire workers that they laid off during the economic downturn or to recruit the new workers they need to fill the influx of export orders.

Most seriously affected is the Pearl River Delta, which is estimated to be short of 2 million workers. The government of Shenzhen City, which like Dongguan is located in Guangdong Province, reported a 40% shortfall of 819,000 workers out of a total demand for 1.944 million. Dongguan, dubbed “factory of the world,” is 1 million workers short. Shanghai, Jiangsu Province, Zhejiang Province, Fujian Province, and the Beibu Gulf area of Guangxi Province are also affected.

The problem is spreading inland, where economic development has picked up in recent years. Wuhan City in Hubei Province, for instance, has a shortage of 80,000 workers. Increased demand in interior provinces is a major cause of the shortage of workers along the coast, since many laborers who used to migrate to other areas to find work can now secure jobs at home. In addition, some inland provincial governments have announced policies to restrict the outflow of labor in order to protect their own industries.

To keep people on the job, governments in coastal areas are boosting monthly basic pay by 15% to 20%--to 960 yuan (NT$4,416 at NT$4.6 to 1 yuan) in Jiangsu, 1,100 yuan (NT$5,060) in Shanghai, and 860 yuan (NT$3,956) in Guangzhou. Employers are also raising pay on their own; with overtime pay, a worker in Shenzhen now takes in 1,700 to 1,800 yuan (NT$7,820-8,280) per month, while a technical worker in Zhongshan City (also in Guangdong Province), makes more than 3,000 yuan (NT$14,000).

Taiwanese businesses in China expect the labor shortage to lighten up in May or June as new graduates leave school and join the labor market. They note, however, that in general labor shortages are a chronic problem, and to cope they will have to automate their factories or move them inland to areas where manpower is more abundant.