Labor Shortage Slows China’s Yangtze Delta Economy

December 30, 2010 Updated: October 1, 2015

The Lunar New Year travel rush, the world's largest annual mass migration, strains the country's transport system to breaking point. (AFP/Getty Images)
The Lunar New Year travel rush, the world's largest annual mass migration, strains the country's transport system to breaking point. (AFP/Getty Images)
China’s previously booming Yangtze River Delta Economic Zone and other eastern coastal areas are seriously lacking labor, according to recent reports from China and Taiwan. As migrant workers—the backbone of the coastal manufacturing economy—begin to retreat to rural areas for the Chinese New Year, companies are receiving orders but can’t find the workers to fulfill them.

The town of Zhu Qiao in Shanghai City was once a busy hub of small clothing factories. But after the 2008 financial crisis, more than 80 percent of them had to close down. While a couple have hung on, they now find themselves in a new predicament: not enough labor.

Cao Wei, the president of one of the clothing factories, told Hong Kong's Wen Wei Po: “In the past there were workers but no orders. Since the economic recovery, I don’t need to worry about orders, but now there are no workers.”

Cao has lost money over the past two years. He thought that after the financial crisis was over the situation would improve—but he didn’t see the labor shortage coming.

“The problem did not start just now. We have had difficulty finding workers since July. So our factory does not dare take orders. We are afraid of not being able to send out the finished goods, and would have to pay compensation [to the customers],” Cao said.

New Year’s Migration

Year’s end is the busiest time for private enterprise in China. Many businesses count on the New Year shopping boom for a big share of their annual sales. But it is also the hardest time for hiring workers. Although many companies have kept raising wages, and lowering the skills requirements for workers, they still cannot find enough people.

This year, most migrant workers have already gone back to their hometowns and families in December, even though Chinese New Year is still over a month away. Migrants chose to leave early to avoid the gridlock that inevitably accompanies the Chinese New Year.

New Year travel in China is one of the largest annual migrations of people in the world; migrant workers make up the biggest percentage of travelers heading home to families they haven’t seen all year.

Last year, severe weather caused mayhem and long delays for millions of travelers, who were stranded for days in airports and outside of train stations in the freezing cold.

Cost of Living

Another reason for labor leaving the Yangtze Delta area is inflation. Official data indicates that the country’s inflation rate in November was 5.1 percent, the highest in over two years. But Chinese scholars believe the hidden inflation rate is higher than the official figure, with increased currency issuance causing a compounded hidden inflation of over 30 percent.

One migrant worker by the name of Little Jiang, told Central News Agency of Taiwan that though his factory provides food and lodging, prices are constantly rising and the cost of daily life is increasing. And because the money he can earn in a year is very little, he would rather go back home earlier.

In addition, more companies have moved their plants to smaller cities in rural China, causing a loss of labor in the coastal cities. Though wages in Shanghai are higher, the cost of living there is also high. Thus, many smaller enterprises have lost their competitive ability and chose to move.

A Better Life

Business owners give another reason for the labor shortage: the younger, “second generation” of migrant workers—born in the 1980s and 1990s—have a different mindset from their parents.

Their concept of a job is changing. They have received better education and are increasingly reluctant to begin a life in low-tech, labor-intensive, and low paying jobs. Nearly 60 percent of the 150 million migrant workers are in this second generation group.