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China's textile industry struggling to entice younger workers

China's textile industry struggling to entice younger workers Source:
Date: 09-07-2013
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The minimum wage in Jiangsu province, one of richest areas of China, increased by 12%, effective from July 1, to 1,480 yuan per month. However, increases are not just limited to the most prosperous regions, with minimum wage hikes of 15% and 14% also noted in Liaoning and Sichuan provinces, two relatively underdeveloped provinces in the northeast and southwest of the country. At present, 18 provincial governments in China have increased the minimum wage during 2013.

However, in Shengze, a textile production and trade hub located in Jiangsu, eastern China, the current minimum wage would be unlikely to attract any workers into the sector. The basic salary for an unskilled worker is currently above 3,500 yuan per month, double the statutory minimum, according to a local business owner.

Many firms in Guangdong province, especially textile and garment producers, have also complained of a lack of available workers. A survey, published by the Chinese Manufacturers' Association of Hong Kong on July 3, reflecting the situation in Guangdong province and the Special Administrative Region, indicated that nearly 90% of enterprises during the past six months encountered a shortage of labour, despite the average salary having risen in 2013 by 13%.

Reports of difficulties recruiting workers to the textile industry have persisted despite the labour element of the Purchasing Managers Index published by the National Bureau of Statistics remaining below 50 during the first half of the year, indicating a contraction in the number of jobs created by the manufacturing sector.

However, that trend is not reflected in the general economy, with official data showing job creation in all sectors continuing to grow, with 3.42 million new positions becoming available during the first quarter, higher than the year-earlier statistic. Moreover, the national population of an employable age actually shrank by 3.45 million during 2012, the first time a contraction has occurred in over half a century. The trend will likely continue in the coming decade, owing to the impact of the “one family, one child” policy in force since the 1980s. In short, the "Lewis turning point”, whereby excess labour in the subsistence sector is fully absorbed into the modern economy, and increased capital accumulation prompts an upward spiral in wages, appears to be underway.

The service sector contributed 47.8% to national GDP in China between January and March 2013, a rise of 1.6 percentage points from the previous quarter. Service industries are booming, in concert with a staggering pace of urbanisation.

Expectations among the younger generation have also changed significantly in the digital era. Unlike their parents, they are not unsatisfied merely to work in order to subsist. Increased consumerism and a desire to earn more in a job with prospects is influencing many to turn their back on factory work.
The implications for the labour market have been profound, especially in the more traditional textile and garment industry. In the short term, plants managers are confronting difficulties in recruiting and retaining workers.

China’s textile and apparel industry has benefited in recent decades from economies of scale. However, profitability is now being squeezed, in face of competition from lower cost rivals. Textile and clothing manufacturers need to adapt, adding value through design and branding. Efforts to promote local brands on international markets will be key to their success. However, increased spending power among domestic consumers may also have a salutary impact, bolstering demand.

The rebalancing of China’s economy is an immense task for its leaders. Domestic consumption, contributed 55.5% to the country’s GDP during the first quarter 2013, and could be the engine of further economic growth, with exports and inward investment faltering.

The domestic textile industry must make the transition into value addition, appealing to a new set of quality conscious clientele. In doing so, it may again become a more attractive proposition to young, well-educated, creative workers.
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