From Chinese Press

Rising labor costs have only just begun

(People's Daily)
Updated: 2010-07-14 09:35

This year, salary increases in eastern China's enterprises and minimum wage raises in China's central and western regions signal the rising labor coast in China.

Seeing through this economic phenomenon, we find a series of problems: is China's economy stepping out of the cheap labor era? In the important process of transition, what opportunities and challenges may lie ahead? How do we seek balance between "full employment" and "decent employment?"

Cheap labor cost era is difficult to sustain

"Labor cost increases are mainly reflected by wage hikes, in particular, migrant workers' wage hikes," said an official with the Ministry of Human Resources and Social Security, "According to our monitor, after 2004, migrant worker's wages saw significant growth from 600 to 700 yuan per month to 1,500 yuan per month."

Shen Qinqin, vice president of China's Institute of Industrial Relations, said he believes labor cost increases include not only wages, but also many invisible costs, such as investment in employees' education, training and enterprises culture.

Analyzing the reasons for this rise in the cost of labor, we should first look at the changes in supply and demand in the labor market.

It was predicted last year that China will have a serious shortage of labor in 2010. The labor shortage this year proved this.

Since this year, employment share of rural migration in the eastern region saw a rapid decline, including a shortage of technical workers and difficulty in recruiting skilled workers. It caused labor costs in this region to increase.

The growth of the working age population has slowed significantly, according to an article written by Cai Fang, an official with Chinese Academy of Social Sciences. At present, rural migrant workers are the main component of the urban work force, but it is expected that the supply of migrant workers will fall short of urban demand as early as 2015.

"This is not a short-term and partial phenomenon, but a long-term and inevitable trend," said Zhang Libin, an official with the Ministry of Human Resources and Social Security. From a long-term perspective, this is just the beginning of rising labor costs, and there is still great room for costs to rise further.

Labor cost increases also reflect the demand of the new generation of laborers who are longing to be paid higher and given better benefits than their fathers.