china's labour market

China, the world's most populous country faces a labor shortage. The expansion of China's manufacturing industry over the last decade owes much of its success to the 150 million workers who have migrated to urban areas. Now the number of migrant workers is shrinking. The U.S. census bureau predicts that the number of 15 to 24 year old Chinese nationals ready to work will fall by almost 30% over the next 10 years. Even this past year, excess workers were scarce, particularly in eastern China. Some factories couldn't fill all their orders.

The world watched this year as labor strikes erupted at factories around China, prompting private companies as well as local governments to increase wages by as much as 30%. According to Morgan Stanley, in the past 10 years real hourly wages in China have increased at an average of 13% per year. Factories are suddenly competing with both the agricultural sector and -- more intensely than ever -- with each other for human capital.

"Particularly around the Chinese New Year, a lot of migrant workers go home and look for better jobs," says Mark Williams of Capital Economics, a research firm based in London. "It's becoming an increasingly competitive market for employers, each of whom are quite aware of what conditions rival employers are offering, like higher wages or waived dormitory fees."

Conversely, at the same time, the unemployment rate among college-educated Chinese youth is rising. According to a recent paper from the National University of Singapore, 30% of the 6 million graduates who enter China's job market each year can't find work. The number of applicants for public servant jobs, for instance, surged from 87,000 in 2003 to 1.4 million in 2009, according to official data. This may reveal the sheer number of college-educated workers looking for jobs outside of factories and farms.

A study published by the Chinese Academy of Social Sciences reported graduates' starting monthly salary was $226, compared to $181 for migrant workers.

The government's response to the recent strikes proved that it is at least tolerating workers making collective claims. But most of the recent strikes have occurred in plants of foreign-owned companies. Among Chinese manufacturers, the will to change has been somewhat diminished by regional rivalries.