Where have all the production line workers gone this year? And what this could mean for your production schedule.

A recent article in the China Daily, “Lost staff prompt a headache”, explains that

businesses in the export oriented Guangdong province are having difficulty in finding enough workers following China’s Lunar New Year holiday.

 This is not really a surprise to anybody that has been doing business with China, as we all know that the turnover rate of factory staff is high after Chinese New Year because annual bonuses are usually given just before Chinese New Year. So if you are going to leave, leave with your bonus.  In past years, even if some staff didn’t return from the holiday, there were always new people eager to take their place.  This year is very different. For example, in one manufacturing town here in the Pearl River Delta,

the local labor authorities forecast that the city needs 200,000 more workers this year, but at least 85,000 workers have still not returned after the festival. 

That means there are 285,000 jobs to be filled, yet the seats remain empty, despite a massive increase in wages being offered.

Why are things so bad this year?

  1. 2012 is the year of the dragon. Chinese people feel this is a prosperous year to start a family.  For example, my Sr. accounting team has 8 people. 5 of the girls are on maternity leave this year! 
  2. Many of the workers in the cities are from the rural country side. Beijing planners are actively encouraging the development of the rural interior and the plans are working. More and more people are happy making a decent living back home and no long desire to travel 100’s sometimes 1000’s of kilometers for a job away from family. For example, at my (former) favorite restaurant next to the office in Shenzhen, the level of service and taste of the food has taken a nose dive because the chef and most of the staff didn’t come back after the holiday. Overnight, the place went from good to bad.
  3. If the wages for these 285,000 open jobs were increased significantly, simple supply and demand would find a way to fill the seats. But with the increased costs of doing business in the cities and with the compressed margins from this “new normal” global economy, Chinese suppliers simply can’t afford to pay more. But in the long run, factories will move or find ways to operate more efficiently and the supply and demand of labor will come back into balance. Check out my blog post “China’s manufacturing slowdown. Why it’s GOOD news for us buyers.

What does this all mean for us buyers?

  1. In this economy, suppliers are making all kinds of promises about lead times to get the orders. Then later using the excuse of “not enough staff” to push out your lead times. Do you due diligence and get a handle on your suppliers true capabilities and labor position.
  2. Be real careful if you are planning to ship orders around the other major holidays this year. I think it is safe to say that there may be smaller exoduses of staff at each of the holidays, not just Chinese New Year. You can find the 2012 holiday schedule here: http://www.psschina.com/resources/passagemaker-2012-trade-show-holiday-schedule/
  3. It’s not too late to start thinking about 2013 Chinese New Year’s plans. Get your orders in early.  At maternity leave is a matter of months, 2012 Year of Dragon births will have an impact well into 2013.
  4. Sourcing is no longer about visiting HK and a few coastal cities. With factories moving into the interior where the labor is still available, buyers like us need to take a pan-China approach.

Wishing you successful China sourcing!

Mike Bellamy

About the blogger

Mike Bellamy is an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center (www.ChinaSourcingInfo.org). He is also the author of, “The Essential Reference Guide to China Sourcing” (chinasourcinginfo.org/book) and founder of PassageMaker Sourcing Solutions (www.PSSchina.com)

1 Comment

  1. Diane Spaur on September 26, 2012 at 6:13 am

    Hello,

    We received an email from one of our suppliers today telling us that Chinese New Year will start Jan 5th and go until February 28th this year. We double checked and they confirmed that rather than the four or so weeks that is typical, because of the power of the Chinese factory worker, they have been told by the mills they work with that CNY for 2013 will be almost 8 weeks. I’m looking for confirmation from other sources. Is this your understanding, as well?

    Thanks, — Diane



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