Migrant workers shun long hours and low pay
Alexandra Harney
Financial Times
2 November 2004
Last year, Yang Li left Luzhou, her quiet home in China's Sichuan province, to work in a lock factory about 1,000km awayin the bustling Pearl River delta just north of Hong Kong. After a month of polishing locks for 13 hours a day, she returned home, exhausted.
Today, Ms Yang runs a hair salon in Luzhou and is relieved that her days as a labourer are over. "Every day at the factory was just work, work," she says. "My life here is comfortable. I can close the salon whenever I want."
Ms Yang is part of a growing number of Chinese migrant labourers who are shunning faraway factory jobs to work closer to home or under better conditions. Their actions are creating a shortage of unskilled labour in the Pearl River delta, one of China's leading export regions, and other coastal provinces. The trend is challenging one of the key factors in the country's extraordinary economic growth: an endless supply of cheap labour.
According to official estimates, factories in Guangdong province, which includes the Pearl River delta, are short of about 2m workers. The area has about 20m-30m migrant labourers. Factories in Fujian and Zhejiang provinces on China's eastern coast are also reported to be struggling to find workers. In shortest supply are women aged 18-25, prized by Chinese factory managers for their nimble fingers and good work habits.
These women's reluctance to toil long hours for low pay has significant consequences, not only for China's economic development but also for international companies. The Pearl River delta produces about one-third of China's exports, leading the world in the manufacture of many products, from shoes to microwaves.
Economists believe that the labour shortage will push up Chinese factory wages faster than expected, fuelling inflation and raising the price of Chinese-made goods. In the short term, it could force some factories in the Pearl River delta deeper inland or overseas and push others out of business. "It's a sign that China is starting to join the regular economics world," says Jonathan Anderson, chief economist for Asia Pacific at UBS in Hong Kong. "Wages rise when you grow. That's the way it works everywhere, and it will be the case in China."
With as many as 100m migrant workers available for employment and hundreds of millions more "under- employed" farmers in the countryside, most factories were able to stave off substantial pay rises because there was always someone who would work for less pay. A study released in September by the labour ministry found that monthly wages in the Pearl River delta had risen only Rmb68 ($8.20)in the past 12 years. In Foshan city in Guangdong province, monthly wages are virtually unchanged from the Rmb600-700 level they reached a decade ago.
But factories that did not raise wages substantially are finding there are limits to the supply of workers. In Dongguan, one of the Pearl River delta's biggest manufacturing hubs with more than 15,000 companies that are backed by foreign investors, banners advertising vacancies for unskilled factory labourers are legion. Some companies, such as Hong Kong's Luen Thai, which makes clothing for Polo Ralph Lauren and other brands, have been forced to set up worker training centres in inland provinces, in part to ensure a stable supply of labour.
"In the old days, when we needed workers, we would just put a sign up [at the factory]" and migrant labourers would line up outside, says Kenneth Fang, chairman of Fang Brothers Knitting, a Hong Kong garment maker with factories in Guangdong. "Nowadays, the signs are up around most of the factories and there are no queues."
Behind the shortage is an increase in farm wages. Most factories in the Pearl River delta hire from rural, inland provinces, including Sichuan, Yunnan and Henan. Workers, many of them farmers, sign up with a labour agent or travel with friends or relatives to the factories. They send much of their wages to their families as remittances. For years, this system worked because incomes in the countryside were much lower than in the factories.
In the past two years, however, the gap between farm and factory incomes has started to narrow. Farm product prices have risen almost 25 per cent in the past 18 months, while monthly farm incomes have increased by almost 40 per cent over the past two years, according to UBS estimates.
The combination of rising farm wages and remittances from migrant labourers have helped propel cities such as Luzhou to a new level of development. This city on the banks of the Yangtze River was once known only for its local liquor; it is now a vibrant urban centre, its streets lined with restaurants, including more than one branch of McDonald's, mobile phone retailers and clothing stores blasting American pop music from speakers.
According to government estimates, 700,000 Luzhou residents left the province last year to work; half of them headed for the Pearl River delta. These workers sent home much of their earnings: funds remitted by migrant labourers provided 38 per cent of Luzhou's net per capita farmer income of Rmb2,515 a year in 2003, according to city government figures.
Remittances have helped people such as Zhou Longhou put their farming days behind them. Born into a large, poor family of farmers on the outskirts of Luzhou, Mr Zhou left the land to work in furniture factories around the country for 13 years, 10 hours a day, seven days a week.
Mr Zhou's earnings allowed him to return to Luzhou and start a carpentry business. He now lets his farmland to the government and makes a comfortable living building furniture with the help of several employees. "A lot of farmers here now have cars and other vehicles," he says.
As household incomes have risen, Luzhou's service sector has expanded, lifting wages to levels similar to those in some Pearl River delta factories. In 2003, restaurants in Luzhou's Jiangyang district paid their staff Rmb250 a month, as well as providing free accommodation and meals. By this year, the wage had risen to Rmb400-450, according to Zeng Guihong, director of the Jiangyang labour recruitment office. The official minimum monthly wage in Dongguan, the Pearl River delta manufacturing hub, is Rmb450. "The service sector here is developing very fast," says Mr Zeng. "They don't have to leave to find work any more."
With better options at home, those who do become migrant labourers are becoming more choosy about where they work. Turnover rates at Pearl River delta factories have risen in recent years as workers seek better pay and conditions, frustrating factory managers who have to pay to train their replacements. Mr Fang says 20 per cent of his employees leave every year.
Tang Meijiao is one such worker. She went to Dongguan from her native Guangxi province with her sister in January to work in a toy factory. The pay was good but she soon tired of her boss's relentless criticism and moved to another factory. Fumes from the products at this plant made her sick. Now she is going home.
"Companies are being punished because they don't view workers as human beings," says Zeng Feiyang, a former government official and lawyer who directs the Migrant Workers Documentation Centre in Guangzhou.
Despite efforts to improve working conditions in factories that supply foreign buyers, many plants fall far short of international standards. In the worst factories, workers stay on the assembly line as long as 16 hours a day. Their pay is docked if they make unapproved visits to the lavatory. Managers refuse to cover hospital costs for workers injured on the job. Sometimes, workers do not get paid at all.
Labour activists say the poor working conditions partly reflect the difficulty of supervising so many factories. But they are also a reflection of the authorities' failure to crack down on violators, they say (see below).
Zhou Zhina, deputy mayor of Dongguan, contends that his city enforces labour laws and dismisses talk of a shortage of workers as "rumour". But he admits the city has only suspended production at five factories in the past few years because of labour law violations. "We can't raise the wage to a high level because this will increase the investment cost to foreign investors," he argues.
Many foreign companies, however, already pay more than the minimum wage. People who work closely with migrant labourers say the shortage is affecting factories with low wages and poor working conditions. Plants that pay wages of more than Rmb1,000 a month - as many factories owned by US and European companies do - have little trouble attracting workers.
The growing selectivity of workers is starting to have an impact on how factories treat employees. Some managers are introducing perks such as roller-skating rinks, internet cafes and football fields to retain workers. Others are raising wages. In April, Fang Brothers raised wages by more than 10 per cent for the first time at one of its Guangdong factories. Yiping Huang, Citigroup's economist for greater Chinain Hong Kong, estimates the cost of migrant labour could increase 20-30 per cent over the next year.
In labour-intensive industries such as toy, garment and shoe-making, which are already paying more for power and water because of shortages, the cost of higher wages could prove more than some companies can handle. "They're beginning to lose money," says Allen Choate, director of programme development at the Asia Foundation in Hong Kong, which provides services for migrant women factory workers in China. "I haven't seen any companies folding . . . but my suspicion is we're going to see a lot of it."
Other manufacturers are looking outside the region. Kingmaker Footwear, a Hong Kong-listed company, is reported to be considering scrapping plans to expand a plant in southern China and is shifting more production to Vietnam. Other Hong Kong companies, the leading investors in the Pearl River delta, are opening factories farther north in Guangdong.
Government officials are now focusing more on educating migrant workers. In Luzhou, officials are beefing up training in areas including machinery and computers to increase the earning power of potential migrant workers. "It's extremely important that this succeeds," says Liu Yike, director of the Luzhou Municipal Party Committee Agro-Industrial Office.
Officials in Xiaolan, a township in the city of Zhongshan in the western Pearl River delta, see the labour shortage as an opportunity to improve training and wages. In June, the town decided it would only actively encourage investment by companies that pay more than Rmb600 a month.
Authorities in Luzhou and other cities are hoping the shortage does not last long. As factory wages rise and farm prices stabilise, more migrant workers may return to the factories. There are still millions in the countryside without adequate employment.
But economists believe these workers will inevitably command a higher wage. Dong Tao, chief regional economist at Credit Suisse First Boston, says: "The Chinese take their cheap migrant worker supply for granted and the rest of the world is taking cheap Chinese products for granted. This definitely has to change."
Activists encourage the fight for rights
As dusk settles on Panyu, a dusty, boisterous industrial district in the southern Chinese city of Guangzhou, Zeng Feiyang is making a quiet contribution to the countrys economic development.
Mr Zeng provides legal advice and representation, as well as leisure activities and language classes, to the army of migrant labourers that staff the thousands of factories in the area. His mission: to improve the lot of the Chinese worker.
Activists such as Mr Zeng, a former government official, are possibly the only people in southern Chinas Pearl River delta welcoming the regions growing labour shortage. It makes factory owners pay attention to the way they treat their workers, he says.
Despite years of attention from humanitarian non-governmental organisations, activists and lawyers, conditions on mostfactory floors in the Pearl River delta in Guangdong province remain poor. The working environment is still not clean or safe, says Mr Zeng.
The problem, activists say, is not one of legislation. China has labour lawssetting out everything from the minimum wage (which varies by city) to the maximum overtime staff can work each month (36 hours). With overtime, employees should be at work for no more than 53 hours a week.
How many factories in southern China do you know that work 53 hours a week? asks Robin Munro, research director of the China Labour Bulletin, a Hong Kong-based group promoting independent unions and the protection of workers rights. None. Eighty hours is very common.
The main issue is enforcement. Non-compliance withminimum wage and overtime requirements is pretty widespread in Guangdong, says Allen Choate, director of programme development for the Asia Foundation, which provides programmes for migrant women factory workers.
Other violations that often go unpunished are the failure by factory owners to pay the full insurance for every employee and demands by owners that freshly hired workers pay a deposit to ensure they do not leave the company too soon.
Sexual harassment of female workers is also common, according to Ge Youli, China country director for the Global Alliance for Workers and Communities, which works closely with factory employees in Asia.
Workers are not well represented. Although there is a national labour union in China, independent unions are not permitted. Organising workers into an independent union, or even participating in a protest, can lead to a jail sentence.
Despite the dangers, worker protests are now more common in China. In the southern city of Shenzhen, thousands of workers from an electronics factory went on strike in early October to protest that their salary was below the minimum level. Intervention from the local labour bureau helped them win a pay rise.
Activists are hoping the labour shortage will provide a fresh economic incentive for factory owners to improve working conditions - not only by providing perks for their workers but also by complying with existing laws.