China's skilled labor pool drying up

An Expert's View about Business Environment in China

Posted on: 4 Jun 2013

Many suppliers cite wages as the main point of contention although worker salaries have climbed steadily over the past several years.

Put plainly, people are seeking jobs with better pay, said Kesley Wang, sales representative of Qingdao Juyuan Fitness Equipment Co. Ltd. The Shandong province-based supplier of health and fitness products works with a job-placement agency that has helped keep the skills gap at bay.

"China companies are growing and they have salary wars for the best talents in the market," said Chen Chunjie, CEO and board member of HROne.

The senior human resources executive added that the skills gap is now evident in HR outsourcing, with a growing number of clients requiring services to find and hire experienced employees. Foreign-owned companies, in particular, are feeling the pressure as skilled workers and qualified graduates are snapped up by local manufacturers.

Some suppliers start the "hiring" process even earlier. They have partnerships with technical training schools to get first pick of the best students to intern at their factories, said Irene Guo, sales manager of Shandong Kangtai Industry Co. Ltd.

This method poses another challenge. Interning at a manufacturing facility more or less secures immediate employment, reducing the number of students who will actually be looking for jobs after graduation.

Chen said the number of graduates might not be enough to fill all the open positions.

Sharing this opinion is Lorenzo Panizzari, operations manager of Nordmeccanica Machinery (Shanghai) Co. Ltd. "The number of manufacturers needing skilled workers is climbing faster than the 'production' of technicians from schools."

Jinjianfeng Group Pinghu Children Tricycle Co. Ltd had signed agreements with technical schools in Jiangsu and Anhui provinces a few years ago. Still, the manufacturer could not fill all vacancies as demand, specifically for technicians, outstripped availability.

Fuan Huacheng Electronics Co. Ltd had similar arrangements with technical training schools but is still looking for electronic, drawing and R&D engineers.

White-collar jobs preferred

Changing preferences is another issue. Rather than enroll at a vocational or technical school, many young Chinese enter university to obtain a bachelor’s degree that would put them on the white-collar career track.

Michael Liang, manager of Qingdao First Safety Footwear Co. Ltd, believes technicians are critical in the manufacturing industry as development will stall without them. "Factory work, however, is considered a dead end."

Chen of HROne said that with the one-child policy, parents can support their children longer. "We can see young adults still living with their parents at the latters' expense. They have less motivation to earn a living. And even if have graduated from university, the salaries are not as high as their expectations."

Nordmeccanica's Panizzari tells of factory personnel who “do not have a sense of responsibility and do not plan for their future.

"Despite my prodding, some workers refuse to enroll in English or technical courses, probably because they think I am requiring them to spend their free time on an unpaid task."

Another issue, Chen notes, is fast-changing technology, because of which the definition of "skill" is more complex than before.

"Not all traditional workers can catch up with the trends. They stay in the 'old skills' and end up not considered skilled talent anymore."

Advantages inland

For makers in the coastal manufacturing hubs, the development of inner China and the resultant hometown pull are compounding their already short supply of skills.

Consumer products companies feel the pinch particularly because “these are the factories along the ‘gold coast’ and are heavily reliant on migrant workers,” said Andrew Reich, CEO of InTouch Services. Shenzhen, Guangdong province-based InTouch provides QC services for overseas buyers.

More factory personnel are seeking and accepting employment in or near their native homes, not necessarily because jobs there pay better, but because they can live within proximity of family and friends.

Jonathan Fenby cites as an example the rural residents of Sichuan province who have found work closer to home thanks to the manufacturing boom in Chongqing and Chengdu, Sichuan's capital. Fenby is the managing director of the China team of research firm Trusted Sources.

"Workers can return to their villages when they have time off and can leave their children there to go to school rather than being restricted in cities by their rural hukou residence registration."

Cost of living considerations are adding to the hometown lure. China Daily wrote in February 2013 of a worker earning 3,000 to 4,000 yuan ($480 to $640) monthly from his job at an industrial park in Nanchong, Sichuan province. He was able to save 20,000 yuan ($3,200) a year, which is double his savings while he was based in Shenzhen and making almost the same salary as his Nanchong job.

For inland suppliers, meanwhile, the migration solves just one issue: populating their factories.

Manufacturers such as Chengdu-based CCK Group/CMMC Co. now have to ensure new hires are in it for the long run.

CCK found as many workers as it needed within a 500km area and will be providing these personnel with appropriate training to hone their skills further. Concurrent with this is instilling company loyalty so that workers will not jump ship once they get enough experience that would land them better employment elsewhere.

Read the full report on China's skilled labor pool drying up. Global Sources is a leading B2B portal and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines and trade shows.

Posted: 04 June 2013

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