Strikes and Wage Hikes: What does this mean for manufacturing in China?

The past several months have seen three important issues arise in the China manufacturing sector: increased wages, a labor shortage and high profile incidents of unrest in major international suppliers. On the tail of a strike in a Honda plant, resulting in wage increases as high as 32 percent, a Toyota parts plant in Tianjin had a brief strike for better wages, but ceased after management quickly stepped in and offered a pay raise for the 800 workers. Yum brand’s KFC in Shenyang just recently finished negotiated with the labor union and signed new collective pay contracts with their workers. The international media are asking if this is the beginning of a major strike epidemic, the end of cheap labor in China or both. Neither of these is likely, but what is happening is a changing socio economic landscape and new class of workers that are pickier, better educated and not afraid to express discontent.

The changing demographics of the workforce

Strikes are nothing new in China and have become an important issue for many local companies. While official statistics are hard to come by, some experts believe that strikes have increased 30% year on year. Regardless, anyone with their ear close to the supply chain knows that Honda and Toyota are not the only companies encountering this phenomenon. What makes the Honda and Toyota strikes different is that they are high profile foreign companies. Still, this is still a tiny percentage of the Chinese workforce.

 What is changing is the demographics of the migrant workers. One thing I’ve realized after living in China for nine years is that things change very quickly. In fact they don’t change as much as they do transform. A strip of restaurants that seem so familiar and permanent can disappear faster than you can say “bulldozer.” The epic economic growth over the past decade has affected the land, cities, industry and people more than I ever could have I imagined had I not been here to witness it. The rural populations, and by extension migrant workers, have not been immune to the transformative changes. Suppliers need to be aware of this and adapt to the changing demographics accordingly.

More and more graduates

One dramatic indicator of the social changes is education enrollment. According government statistics, the graduation rates of vocational and academic high schools has grown from 3.4 million in 2001 to 8.4 million. College graduation rates likewise have jumped from a million in 2001 to a projected 6.5 million in 2010.

What does this mean? The young migrant workers are more likely to have attended school longer than the past generation and are leaving their homes with the hopes of their family on their shoulders. They are the generation whose parents toiled through hardship to put them through school and give them a better life. As a result, end goals that don’t stop at the paycheck or factory line. They’re optimistic about the future, and they should be. Unlike their parents and grandparents who lived through a tumultuous time of war, instability and disruptive polices, they’ve grown up in a world that’s only gotten better the older they get.

Similarly, they’re going to care about having a life outside of the workforce, i.e. less overtime and more time for themselves. In finding jobs, they’re going to put more value in things such as: factory entertainment facilities, the location of the factory and even gender demographics in their workplace. While yesterdays workers just wanted to make ends meet, this group wants something more and are less likely to put up with unfair wages or inhumane conditions. Likewise, they want more opportunities in their job than just making money alone. A study done by Ministry of Human Resources and Social Security in February found that workers were not returning to jobs due to lack potential for development, too much overtime and lack of chances to learn new techniques.

The suppliers who find the talent are going to be those who are sensitive to the needs of their workers and provide tangible and intangible ways to keep them happy. What do you think are some ways factory can improve their environment for young adult workers?