Is end of 'limitless labor supply' good or bad for China?

The labor shortage is nothing new in China. It is a phenomenon that has been seen since 2003. What is attracting attention and concern this year, however, is that enterprises in hometowns of migrant workers are also facing the same pressure of labor shortages as their competitors in the more developed areas of the country. But some think it can be a benefit for the country and its migrant workers.

In Chongqing, a municipality in China's southwest, migrant workers who went back for the Chinese Lunar New Year found themselves welcomed at the city’s railway and bus stations by big companies, such as Foxconn, which seek to recruit new workers for their local factories. Manufacturers in many other provinces and cities, either in more developed Zhejiang and Guangdong or in less developed areas, such as Henan and Sichuan, have also deployed similar recruitment campaigns.

The reasons, according to experts, lie in the changes in the country's demography and industrialization. Claiming "the era of limitless labor supply has come to an end" in China, Zhang Zhanxin, an expert on social security at the Chinese Academy of Social Sciences, said that the labor population and its ratio in the total population has decreased significantly as a result of the implementation of more than 30 years of the one-child policy.

Statistics show that the reserves of rural migrant workers have dropped by 20 million over the last three years. There are fewer primary students and new laborers every year.

The country's more developed eastern coastal area is particularly feeling the strain of the labor shortage due to China's industrialization process. The national policy encourages the less developed areas of the country's mid-western regions to take the opportunities of promoting its industrialization when manufacturers in the coastal areas move there.

That relocation accelerated in 2010, creating a big job market for migrant workers. Wages in the east are also losing the attraction for migrant workers. The gap between the east and west is only 5 percent.

There are concerns over the possible negative impact of the labor shortage on the country's sustainable economic growth, which has outpaced that of any other economy in the world. According to U.N. statistics, China will face stiff competition from India in the not-so-distant future. An estimated 65 percent of India's total population will be working age by 2035, making it the world’s largest labor supplier. The Beijing-based Global Times recently cited a Goldman Sachs’ prediction that India would enjoy a long period of "demographic dividends" in its economy until 2050.

But China could also benefit from the apparent labor shortage as it is in the process of building a more inclusive, fairer society and is striving for more balanced growth. Leading local media outlet Guangzhou Daily, for example, said on Saturday that the current labor shortage could give migrant workers more say in the industrial relations that are dominated by capital and could facilitate the industrial transformation from a labor-intensive to a tech-intensive model.

Migrant workers need more "friendly policies," Zhang said. Pensions, health care, housing and other social policies should all be reformed to provide a better environment for migrant workers. And those reforms could facilitate further reforms on China's household registration policy, which would lead to a more equal, inclusive society.

Zhang stressed that a good solution that gives equal treatment to migrant workers is important to social development and fomenting a real inclusive attitude toward different social groups.
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