Friday, June 22, 2012

Chinese Labor (and Fried Chicken) Shortage

A story of China, fried chicken, and labor shortages

There's a labor shortage in China. Yes, in the land of over 1.3 billion, companies cannot find enough workers. Well, at least this is true for certain companies. While browsing a Chinese newspaper yesterday, I read an article with startling reports on labor market conditions in Guangdong, or the Hong Kong area, that talks about the exact same points as the linked article. In short, inland China is getting richer and more developed, putting upwards pressure on coastal city wages. And when those wages start becoming uncompetitive, there's growing pains as increasing amounts of migrant workers stay near their inland home provinces, working for newly constructed factories there.

Another interesting manifestation of the coastal city labor shortage in Shanghai, where I currently am, is that KFC is attempting to actively recruit workers. Yes, the fast food service industry, what is often considered to be an employer of last resort in the United States, is advertising its job offers. Below is a picture of one of these posters:

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Note the happy, young, restaurant workers, who are looking forwards to a bright future. There were also other posters that declared it was time to get trained, time to get down to business, and learn the ways of working at the Chinese KFC equivalent of a West Point. On every table in the restaurant, there were little stickers listing the restaurant shifts, and of when workers would be able to get free food during their shifts.

Yet in contrast to this apparent worker "shortage", I still observe people working in extremely low productivity positions. Streets are still manually swept by workers in blue jumpsuits wielding long brooms made from thick straw. Streetside vendors pedal mobile kitchens around to serve day workers lunch and dinner. It is as if they are part of a broader labor mismatch problem in China. In the case of Shanghai, there aren't enough workers into official jobs such as fast food service, even as a large proportion of the labor force is in extremely low productivity or shadow economy jobs that they've held for a long time. I see this as another way state managed investment booms fail to effectively promote welfare. Although airplanes and train stations are fancy, there's a lot more low hanging fruit if the government could build the capital to obviate repetitive manual tasks (Street sweeping? Really?). This could allow a shift into more manufacturing or just higher end (think KFC) service work.

The fact that coastal cities are dealing with labor shortage while inland factories are blossoming strikes me as funnily ironic. While we in the U.S. complain of offshoring and outsourcing to lower wage areas, coastal China is dealing with "inshoring" as factory jobs move inland. This really strikes at the heart of why labor reallocation happens. Once the standard of living rises, it's no longer sustainable to keep people in low wage jobs. And when those wages start rising, there start to be competitiveness issues as productivity doesn't keep pace. I imagine this productivity competition is even stronger between inland and coastal China than it is between the United States and China, as the gap between production technologies employed within China is likely less than the gap between the production technologies employed by the United States and coastal China. China really is, as Chovanec says, nine nations governed under one flag. It is not a monolith, but rather a collection of subregions, each with their own markets and attending problems.

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