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Labour Shortage in China Soon

12 May 2007

The general perception is that China has one thirds surplus rural workers, in other words, it has 100 to 150 million unemployed labours in the rural area. But the reality paints a quite different picture.

According to a research study done by China's Social Science Academy released on Friday, currently there are only 52 million idle labours under the age of forty in the rural area.

In just couple of years, in fact, China is going to face a labour shortage, and by 2015, the country will experience a zero growth rate in labour force, said Mr Cai, the drafter of the study report.

Mr Cai further illustrated in an interview with the state television station that the current labour surplus is mainly caused by a structural problem rather than an oversupply of workers.

China's labour structure has undergone a series of changes in recent decades. When the Economic Reform started thirty years ago, rural labours accounted for more than 76 percent of China’s total working population; in 2005, it dropped to 64. The true figure is even lower, according to Mr Cai, as many self-employed migrants living in urban areas are still registered as rural workers, while in cities those who were retrenched from state-owned enterprises are not counted as employed even after they have returned to work in private sectors.

It is common for a country in the transformation from agriculture economy to industry economy to experience a shift from labour surplus to labour shortage. What is unique about China is the time that it has taken for the transformation. Normally it needs a hundred years to accomplish, in China the circle is complete in just thirty years, partly owning to the implementation of the One-Child policy among the ethnic Han population.

The first sign of the labour shortage appeared as early as in 2004 along China's coastal areas, but now the trend has been observed in the interior regions. Sooner or later it will trigger a wage rise across the board and an increase in total labour costs of businesses.

It shall be a positive development for China’s more than a hundred million migrant labours, who have overworked yet have been overlooked, are always underpaid and sometimes unpaid.

During this so-called Labour Day Golden Week, for instance, majority of the migrant labours saw no gold: they have to cope with the extra holiday expenses without holiday pay.

Delaying and even denying wage of the migrant labours, particularly in the building and construction sector, was a huge problem and still is a problem now, with fatal consequences including death and bodily harm heard from time to time. Once Prime Minister Wen Jiabao had to go out his way to demand the labour heads (包工头) to release wages owned to their workers, so as to enable the migrant labours to return home for a Chinese New Year reunion.

Migrant workers demand their rightful pay denied by their employers

Although wage increase may blunt competitive edges of some Chinese products in the world market, it doesn't necessarily present as a negative impact on China's overall economic growth. "In fact it can help strengthening the domestic market," one on-line post points out. As for the possibilities of seeing foreign investors rechannelling their funds away from China, it is relatively small, since apart from the cheap wage factor, a stable political climate, preferential policy measures and a sizable domestic market all play important parts in attracting the foreign investments to China, the post concludes.

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