labor - Shortage or no shortage of Chinese workers?

Mostly I would agree with the well-documented arguments Arthur Kroeber, managing editor of the China Economic Quarterly, uses in his insightful articles on China. But his latest analysis "No risk of 'labour shortage' in southern China, written for the Financial Times, misses the point, I believe.

Some people seemed to think that if factories in Guangdong province could no longer get away with forcing employees to work 100-hour weeks, locking them in firetrap factories, and exposing them to the risk of uncompensated maiming or death – all for the princely wage of Rmb500 per month - then it was a sign of serious economic overheating. Or more ominously, that this marked the beginning of the end of the cheap-labour story that has fuelled China’s economic growth for the past decade.

Kroeber describes Guangdong as an anomaly in China and the world, and maybe it is, but it is an anomaly that has allowed China to dominate export markets worldwide. Because profits of those companies - and to a lesser degree those in other parts of China - are marginal, rising wages will undermine those companies and China's export position. Maybe it should happen, for the benefit of many involved, but it will cause massive disruption of the business process that has developed over the past two decades.

In the 1990s, this meant that Guangdong was able to keep labour costs extremely low, since there were abundant migrants competing for jobs. Between 1992 and 2002 real wages in Guangdong actually fell, even though the local economy grew at a double-digit rate.

While wages in for example Shanghai have been higher than in the manufacturing sector in Guangdong, I have seen salaries going down there too. Competition has been at least similarly gruesome.
The real problem is of course going to be the number of well-educated and experienced people: that might be a tougher problem than the rather low-educated workers in Guangdong.
More about the labor-debate here.