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MANUFACTURING EMPLOYMENT AND COMPENSATION IN CHINA - page 30 / 106

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--Objectionable practices, such as routine withholding of months of wages by manufacturing employers in order to prevent workers from leaving the factories, are becoming widely known among former, current, and potential migrant laborers, who are realizing that they will not be paid what they are promised. Therefore, fewer workers are willing to migrate, especially to the PRD. The PRC government has passed a new law effective December 1, 2004, to force employers to pay all wages owed and pay on time. 82

These labor shortages will presumably be solved by policy changes to make migration more desirable and feasible for rural workers, as well as by rising wages and improved working conditions in China’s manufacturing enterprises. Trade and non-trade barriers between China’s provinces need to be eliminated in order to free up the movement of labor: “While Guangdong’s factories are thought to be as much as 2 million workers short, the inland provinces have cheap labour in abundance.” 83

What about the coming decade or two? Will China run out of people willing to work in manufacturing for a low wage by international standards? It is true that the PRC had a steep fall in fertility during the 1970s, when China implemented its forceful family planning program in rural areas and then its one-child policy. Since then during most years, fertility in China has been extraordinarily low by developing country standards. Cohorts of children born from the late 1970s to the late 1980s have already entered labor force ages. China’s cities in particular have comparatively small cohorts of young adults because of the success of the one-child policy in cities. So analysts might speculate that China will soon experience shortages of young adult workers, especially in urban areas but nationally as well.

Countering this demographic trend, however, is the massive legacy of surplus labor in China’s rural and urban economies that will continue to be felt for some time: “…a sizable surplus of labor still exists in the rural sector (about 150 million) and state- owned enterprises (about 10-11 million).”84 If there are shortages of city-born young adult workers in some economically booming cities, employers can find eager workers from the vast countryside who can be trained to do most of the jobs, even if their education had stopped after junior middle school. Now and in the coming decades, urban China can draw on rural-to-urban migrants to fill gaps between urban demand for labor and urban-born supply of labor.85 “Up to 500 million peasants are expected to migrate to cities in search of factory work over the next two decades.”86 Not only that, but productivity in China’s manufacturing industries will continue to rise, which will require fewer employees for the same output. China’s massive pool of rural labor needing modern jobs is expected to continue to depress manufacturing wages in the PRC:

The United Nations estimates that some 200 million people will move from China’s rural areas to cities between 2000 and 2010. Even assuming labor demand from China’s factories keeps growing rapidly, there is an almost infinite supply of workers to fill it. That means wages will likely remain low, and employers will have little incentive to listen to complaints about working conditions. 87

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