Last week we looked at some of the key economic factors influencing business in China. These included the rise of labor costs in places like Shanghai and Shenzhen, impact of supply side economics in performance metrics, and increase in the use of industrial robotics.
Economics, though, only tell one side to the story.
There are also the people hiding behind these numbers.
As with economics, corporate leaders must understand the human factors moving and shaking business here. In a previous piece, Fulcrum questioned how China’s massive labor force could potentially impede innovation in the future. The labor trends below are impacting business now.
Workers are going home, and staying there. According to China’s Bureau of Statistics, there are over 274 million migrant workers crisscrossing the country. These workers are the backbone of China’s development over the past decade, but things are starting to dry up for them. Rising costs of living in major cities, coupled with fewer job opportunities and a lack of social welfare safety nets, mean many migrants are returning home and staying there. Now, there is an increased demand for workers in second and third tier provincial capitals. These new frontiers of development are able to capitalize on the skills learned in China’s megacities. Caixin reports a 26 percent rise in the number of rural migrants working locally, versus seven years ago.
Labor unrest is now the norm. There is also an increasing focus away from the things being made in Chinese workplaces and towards the people making them. Pushing this onto the national agenda is the spike of labor unrest throughout the country since 2014. In 2017 alone there were nearly 1,000 major labor-related protests in China according to China Labour Watch. Workers are protesting for fair treatment, payment of wages, and social insurance. The Government has had no choice but to listen. In turn, factories are feeling the pressure to comply.
Social insurances are no longer a “nice to have.” The social insurance system in China is extensive. Until recently, however, it wasn’t truly enforced. In fact, such of the impetus for labor unrest was a response to underpaid social insurance. This has led the Government to tighten its oversight of companies to make sure they are paying their fair share of contributions. These include pension, unemployment, and housing funds, as well as medical and pregnancy insurances. There is still a long way to go before the system is operating fully above board. Savvy businesses will want to make sure they get there before the Government does.
If we go back less than a decade ago, to the tragic era of Foxconn, workers were expendable necessities of operating in China. Today, treating workers well, abiding by environmental, health, and safety regulations, and providing for their fair livelihood are the foundations of business here. As a market develops, ensuring those at all levels of society develop with it is critical. In the sustainability world, we call this inclusive, or mutual, economics. In Xi Jinping’s New Era, the rights of the working class are once more front and center. As we enter this Chinese New Year period, where millions of migrants will take their annual trek to see their families, this is even more salient.