Are your employees returning in February? – the WTO column

(Later also at Chinabiz)

Shanghai - The first trains with migrant workers have left the rail ways stations to go home, to celebrate the annual Spring festival at home, causing the traditional logistical mayhem. More than ever, employers who see their workers leave, have to ask themselves a rather unsettling question: Will they come back in February?
It seems at first sight an odd question as three million graduates are struggling to find their first job in a labor market in the big cities that seemed to have for decades one thing in abundance: cheap labor. At two ends of the labor market those graduates are pretty useless, as more experienced managers and in the sweatshops for teddy bears. Those two markets face unprecedented challenges.

Last year saw for the first time a threatening shortage of migrant workers, especially in the southern parts of China. Factories, living on very tin margins, could not deal with the fast growing demand because they were short of labor. High living costs in Guangdong and improved returns on agricultural products made millions of migrant workers decide to stay home. Early signs indicate this tendency will gain more momentum this year. Life at the country side has started to improve after a decade of relative stagnation compared to the cities. A bumper harvest in 2004 and stimulating measures of the central government helped this turnaround. The abolishment of agricultural taxes in most provinces this year will encourage that positive trend.
On top of that, the threat of inflation is building up as also an ongoing poll of Chinabiz shows. That might increase living costs for migrant workers even more while most companies seem not able or even unwilling in raise salaries.

At the top-end of the labor market similar trends are visible. Traditionally China already had a shortage of experienced managers, one of the leftovers of the Cultural Revolution when education was disrupted for almost a decade. While every year the level of experience of Chinese managers goes up, that has not matched the current speed of economic development. Hongkongnese and Taiwanese have profited from this gap in managerial talent, not in the last place financially. Meanwhile, the labor market has improved for Chinese managers, but they often did not see a similar financial compensation, causing much irritation. That caused tensions, also because sometimes the Hongkongnese and Taiwanese managers did not live up to the high expectations, adding to the already existing unease.
For experienced Chinese managers it has become easier to swap jobs and increasingly they do. A larger US company saw last year in one week time 30 percent of its pool of carefully trained senior managers leave for the competition. The reason: they got new Japanese management.
Those sentiments often go along with a rather ugly racist or racist-like attitude – since Hongkongnese and Taiwanese belong to the same Han-race. But deep under those sentiments there are also justified reasons for the resentment. The glass ceiling in the career path, the difference in payment for non-Mainland managers, the lack of opportunities to develop a real international career.
Sometimes these complaints are over the hill, sometimes they are really justified, despite the rhetoric of especially foreign enterprises. Whether those complaints by Chinese managers are real or perceived, it makes sense to address them.

Fons Tuinstra