China’s Bosses Size Up a Changing Labor Force

China’s Bosses Size Up a Changing Labor Force

By Christina Larson September 16, 2013

John Liu is the 31-year-old founder and owner of Harderson International, a small factory in southern China that applies paint and decals to ceramics and glass. His showroom includes samples of tinted perfume bottles made for Ralph Lauren and Kate Spade. A 2006 graduate of Wuhan University in central China, Liu is not much older than the 20-somethings and late teenagers who come to work on the assembly line. But generational cohorts in China are extremely compressed, and Liu sees a vast gap in expectations between himself and those a decade younger. “When I finished school, I felt I needed to find a good stable job quickly and earn money,” he says. “But living conditions in China have improved quickly. Young people now don’t have to work so hard to earn a living, and many have parents who will support them. … A lot of those born in the 1990s can’t stand this kind of repetitive work, so they choose to stay home or do very simple cashier work, even though it pays less.” The upshot is that, for a small factory, it’s “getting harder to find workers.”Last year the total size of China’s working-age population began to decline, according to figures from China’s National Bureau of Statistics. As the Economist ominously noted, China’s moment of “peak toil” has passed. Yet it’s not only demographics that are changing. Today’s Internet-savvy young workers have different ideas and higher expectationsthan their predecessors, and not only regarding pay. In response to an evolving workforce, factory managers at a handful of small and midsize plants in China’s Pearl River Delta say they must now offer better conditions to attract and retain workers—or else look for opportunities to automate.

“In the 1990s, if you hung a job advertisement out on the street, hundreds of people would swarm for jobs. Ten years ago, if you put up a sign, some would still come, but not as many,” says Kevin Chang, general manager of Concord Ceramics. “Five years ago, if you hung a sign, almost no one would come. Today you have to proactively look for people.” Chang runs two midsize factories making ceramic decals in southern China. Like Liu, he sees stark generational divisions. “Workers born in the 1970s typically had limited education; they grew up when China was still backward and had little exposure to the outside world. Workers born in the 1980s have more technical expertise and depend heavily on working in a particular industry,” he explains. “Those born in the 1990s don’t even want to work. Even many with college degrees don’t know what they want. Single children are pampered, and they often stay home in their parents’ homes. They make very unstable workers.”

Chang sounds critical, but he doesn’t wholly fault workers’ new attitudes. “I can see they don’t want this—a manufacturing life. It’s a social issue, too. If they cannot even secure a home, how can they be happy?” He’s referring to China’s controversial hukou system of residential permits, which prohibits many migrant workers from buying apartments or setting down permanent roots where they work. Recognizing that China’s labor force is evolving—gone are the days of a seemingly endless supply of cheap, undemanding workers—Chang says he is now eager to “explore which parts of the manufacturing process can be automated.”

With a thick thatch of curly hair and propensity for exuberant gestures, Circle Furniture factory boss Bruce Lee seems much younger than he is. He doesn’t like to tell people, including his wife, his real age, because he doesn’t want to seem old. But the 50-something Lee has been in the business long enough to have seen the fortunes of Chinese furniture makers rise and fall. (He pinpoints the years 1997 to 2004 as the industry’s glory years.) With rising labor and raw material costs today, weaker demand from Europe, and a less favorable renminbi exchange rate, he says it’s a struggle just to stay in business. “But there’s no turning back,” he says, sounding a bit like his kung fu namesake.

Lee has just moved his factory out of high-rent Shenzhen to the inland city of Huizhou. Furniture making doesn’t lend itself to automation, so he has been keen to retain his experienced workers. Differing from the norm, he prefers to hire slightly older workers; most of his line workers are between the ages of 30 and 50. Bowing to changing expectations, he now allows them to bring families to live in larger dormitories. He also bought key employees new Honda motor scooters to entice them to stick with him after the move. “You need to see the big picture,” he says. “It probably saves money over the long run to spend more on providing good food and favorable conditions to keep staff, rather than constantly spending money to find and retrain them.”

To be sure, Circle Furniture’s perks are still the exception in China. But the recognition that factory bosses can’t take workers for granted is becoming more widespread.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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