The End of Cheap Labour?

Hot on the heels of my blog entry on L'Oreal's success in male cosmetics for Chinese consumers, comes further evidence of the changes that are starting to affect China as the country develops. Some of these developments are the natural impacts of economic growth and others are due to the high degree of state control exerted by China's political leadership.

You'll recall that analysts held the one-child policy responsible for pressure on Chinese men to find a mate. Governments have tried to influence family size in the past, with examples of brith rate encouragement drawn from 1930s Germany, post-World War 2 Israel and most recently in Singapore. Fertility prevention examples also exist as in the case of the forced sterlisation of Puerto Rican women living in poverty between the 1930s and 1970s.

In China, a one-child policy was introduced in 1978, primarily to limit population growth impacting resources adversely. The country's enormous population, though, has been an enabling factor in its rapid economic growth in the past 20 years. Observers are now saying that the structure of China's population poses serious threats to the country's progress in future. The problem is that in demographic terms China is getting older fast. It does not yet have the wealth to support its looming high dependency rate.

And that's where the travails of workers at the giant Foxconn factory in Shenzhen, southern China come in. Foxconn's is just one of many 'super factories' in the region, employing 420,000 staff, the same population as the English city of Bristol. The problem is that the factory has become an example of a suicide cluster, where groups of young people react to impoverished or isolated environments by considering the ultimate reaction.

Foxconn, a Taiwanese company which is a contract manufacturer for many technology firms such as Apple, Nokia, Dell, Sony and Nintendo, have been trying to halt the spate of worker deaths by providing more recreational opportunities for off-duty staff. It has also brought in teams of psychologists and even Buddhist monks to help deal with the problems. And yesterday the firm announced that its wage levels would rise by 70% from October, on top of previously announced hikes which take wages from 900 renminbi or just over £90 per month, to 2,000 renminbi or just over £200 in just two weeks.

It seems that, together with raised minimum wage rates elsewhere in China, the era of cheap Chinese labour is coming to an end. Demographic effects, economic development, globalisation all seem to be leading to staff shortages and plummeting morale for some workers in China. The country has to hope thatr it has invested sufficiently in high value innovation in order to progress further. As it stands it seems that China won't be able to rely on such a huge pool of low-wage labour in future.