Introduction
China, one of the countries that are well known for their surging industries and cheap labor, has started going through a change that is likely to revolutionize its manufacturing industry. The country boasts a literacy level of over 90.9% and 1.9% of its GDP is dedicated to education.
In addition to this, this great Asian nation also boasts a modernized system of education, which to a larger extent runs on principles that are similar to those of the American education system (Library of Congress – Federal Research Division 11-12). Although in the past Chinese factories were known to offer their workers as little as 64 cents per hour, the trend is changing as most workers have started to demand more remuneration and improvement of their working conditions.
As a result of this, presently, most organizations have been forced to change their remuneration systems in order to accommodate the ever-changing needs and demands of their workers (Dooley, Folkerts-Landau and Garber 3-13). Therefore, as China is becoming a stronger economy as a result of the recent developments, cheap labor is disappearing slowly, and with time, there will be no more benefits of cheap labor.
Source of China’s Cheap Labor
China is a land that is blessed with a very productive population of close to 1.6 billion people. With such great workforce, even graduates have been forced to work for minimum wages in order to survive. Although, over the recent past, the Chinese government has heavily invested in its education system in order to equip its populace with the required skills, still a great percentage of its people lack the kind of specialized skills that are required in the field.
However, with the changing trend as most Chinese have ventured into improving their level of education, the situation is bound to change drastically; hence, the idea of China offering cheap labor is likely to diminish completely (Liu 39-47).
China’s Education and Working Conditions
Over the recent past, there has been a dramatic increase in the number of Chinese students who are presently attending universities, as more than 60% of high school leavers are presently attending higher learning institutions.
To a larger extent, this has been promoted by the recent increase of the starting salary of graduates, as compared to nine years ago when everything was stagnant. Additionally, with more than 127,000 Chinese students studying in America, China has been forced to review its salary structures to suit such students, as their quality of education is considered to be better (Litao and Sixin 1-15).
In the labor industry, lately there has been a high staff turnover as compared to a few decades ago. Unlike in the past when most organizations attracted cheap labor, hence, could hire and fire workers as they wished, present technological advancements and change in labor laws have given workers a chance of getting lucrative employment opportunities and a chance to fight for their rights (Fan 105-107).
As a result of this, most organizations have been forced to change their employment strategies in order to limit chances of loosing workers with specialized skills (Fan 107-108).
For example, since the introductions of the Minimum Wage Bill of 2004, there have been numerous labor disputes between workers and employers, which have greatly helped to shape the labor industry (Estlund and Seth 9-29). Moreover, the introduction of the 20% wage bill by the government in 2010 forced numerous companies to review their salary packages, as most of them started to lose specialized workers to small farms with lesser amounts of work (56-57).
Presently, Chinese workers have more rights and gone are the days when they could be exploited beyond measure. A good scenario is when workers went on strike at the Honda Motor parts factory due to poor pay and working conditions. The strike forced the company to increase the salary of its employees by 24%; thereby, giving workers more bargaining power and consideration.
On the other hand, with China becoming a manufacturing force in the world, workers from all over the world are now seeking employment in Chinese cities. As of 2012, it was approximated that there were over 460,000 foreigners working in China. This is a clear indication that the idea of cheap labor is dying slowly in China (Estlund and Seth1-10).
Current State of China’s Manufacturers
Due to labor shortages that companies are experiencing as labor costs have soared up to levels that most investors cannot afford them, most investors have opted to return to their home countries or venture into other nations to look for cheap labor. The biggest challenge for most manufacturers occurs during holiday breaks when millions of workers return to their rural homes to enjoy the holiday.
This unexpected reduction in production has put a great strain on manufactures, as most of them cannot produce to the required capacity. Therefore, with the increasing labor shortage, most companies are now being forced to include lucrative packages such as bonuses, while others are now offering cash incentives to lure new employees and to retain the ones they have (Banister and Cook 43-44).
Presently, as compared to the past when people eyed China for cheap labor, the search for cheap labor has been shifted to countries such as Thailand and Vietnam, which are now popular due to their low labor costs and easy access. Countries such as Japan have already set up their car factory in Indonesia, which is a country inhabited by close to 239 million people who offer cheap labor (The Economist Intelligence Unit 9-17).
In addition, due to wage stagnation in Mexico, the country has also created a favorable business environment for American companies as compared to China whose labor cost has increased alarmingly. Likewise, Myanmar, which is a country that has seen few developments in the past years, is now seen as a lucrative avenue for investments by western countries due to its cheap labor (42-44).
On the other hand, with the inception of robotics, presently companies are not dependent on human labor in their production processes. Such is the case because robots are fitted with artificial intelligence, which is capable of working faster and efficiently. Due to this and other developments, some western companies that have factories in China have reverted to the use of these robots, as they greatly help to reduce overall labor costs (Clive and Gorle 17-25).
Conclusion
In conclusion, considering the numerous achievement and advancements that China has gained over the recent past, there are high chances of the idea of getting cheap labor in China becoming a thing of the past. Presently, this great Asian Nation is slowly moving from the bracket of “developing nations” to a new bracket of “developed nations’. Therefore, with such a transition, China is likely to be one of the most expensive nations to invest or start a business in.
Work Cited
Banister, Judith and Cook, George. (2011). China’s employment and Compensation Costs in manufacturing through 2008. Web.
Clive, Andrew and Gorle, Peter. (2011). Positive impact of Industrial Robots On Employment. Web.
Dooley, Michael, David Folkerts-Landau, and Peter Garber. (2004). Direct Investment Rising real Wages and the absorption of Excess Labor in the Periphery. Web.
Economist Intelligent Unit. (2012). Skilled Labor Shortfalls in Indonesia, the Philippines, Thailand, and Vietnam. Web.
Estlund, Cynthia and Seth, Gurgel. (2012). A new Deal for China’s workers? Labor Law Reform in the Wake of Rising Labor Unrest. Web.
Fan, Cindy. “The Elite, the Natives, and the Outsiders: Migration and Labor Market Segmentation in Urban China.” Annals of the Association of American Geographers 92.1 (2002): 103-124. Print.
Library of Congress – Federal Research Division. (2006). Country Profile: China. Web.
Litao, Zhao and Sixin, Sheng. (2008). China’s Great Leap in Higher Education: EAI Background. Web.
Liu, Mutian. (2010). Graduate Unemployment in China. Web.