No China labor crunch in 2013, say experts

In the weeks immediately following Chinese New Year, many factories reported a higher return rate than in prior years for employees who left for celebrations in their home provinces. Meanwhile, other suppliers said finding employees to replace those who did not return to their jobs has so far been easier.

According to RBC Capital Markets analyst Amit Daryanani, the hiring freeze by Foxconn right after the festival indicates lower attrition rates. Daryanani estimated the employee return rate following the most recent Chinese New Year at China factories was nearly 90%, compared with 70% to 80% in previous years.

A related RBC report says, “Our checks at other supply chain companies suggest that the worker return rate in China post-Chinese New Year has been much higher in 2013 vs. historical averages. This may be one reason Foxconn implemented a hiring freeze post-Chinese New Year.”

Cornelius Mueller of Shenzhen’s Sinoland Worldwide Ltd made the same observation. “The general employee situation in electronics plants is much more relaxed now when compared with the past 5 to 10 years.”

Mueller is referring specifically to Pearl River Delta plants, adding that he has not noticed any major labor shortage this year among Sinoland’s partner factories. “Previously, some plants had to replace 50% to 70% of employees. This year, the same suppliers face just 20% of workers not returning.”

Suppliers will have a clearer picture of employee requirements as operations normalize. So far, the PRD situation is “not markedly worse,” says Renaud Anjoran of Sofeast Quality Control, which helps importers improve product quality in China. Anjoran also described the current employee deficit as the same or perhaps a little better than in 2012.

With most of its employees returning after Chinese New Year, Oneleaf (HK) Ltd’s Shenzhen factory has a labor pool deep enough to meet all of its current manufacturing commitments.

While annual labor shortages have been reported in China for the past decade, the Urban-Rural Migration Project found that a large percentage of the rural labor force has not migrated to cities. They are deterred by the “hukou” system, which restricts migrants’ access to social welfare and other benefits.

“Many economists think China has run out of cheap surplus rural laborers,” RUM project leader Xin Meng said in a The Wall Street Journal interview. “However, our data shows that only about 25% of the rural hukou labor force migrated to cities in 2010. They frequently stay in cities for a relatively short time, from seven to nine years.”

More perks, more pay

Better compensation packages, and improved working and living conditions at factories could be a factor behind the high return rate of employees this year.

Suppliers are offering better fringe benefits and also raising wages in an attempt to encourage worker loyalty.

Perks, in fact, are now the norm in China’s manufacturing companies. “Post-90s employees have higher expectations than their…

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