Chinese Labor Shortage, U.S. Problems

A Chinese worker at a garment factory in Pinghu, near Shanghai, on April 10, 2010

Image: PHILIPPE LOPEZ/AFP/Getty Images

Labor shortages in China are causing headaches for American businesses that rely on Chinese manufacturers for at least some of the parts they use to make finished products.

“That’s why we’re going to be a little late on our samples,” says Gretchen Hollingsworth, co-founder with her husband David Duncan, of Paddywax. She recently returned from a trip to China, and meetings with suppliers of some of the materials Paddywax uses to make its finished product, decorative hand-crafted scented candles. She was told she wouldn’t be able to have the materials she needs to make samples of the company’s new products until mid-June.

She had been hoping for the beginning of June. “We’re going to be scrambling by June to get some samples out,” she said. That’s important because retail buyers will make decisions this summer about products on their shelves during the all-important Christmas season.

But those problems are minor compared with some businesses that are shipping orders weeks late, because the just-on-time delivery they’re used to from China isn’t coming just on time any more. During two calls with companies that sell Paddywax products to retailers Monday, representatives of the sales organizations praised the Atlanta candle and scent maker for delivering its product on time and said the Chinese labor shortage has caused other manufacturers to be late on deliveries.

The shortage may come as a surprise to those of us in the West who thought China, with its billion-plus population, had a virtually endless supply of workers to staff its booming factories.

But it’s a very real issue, and one that could mean shortages for American businesses and even higher prices for Chinese goods.

Edward Harrison of Business Insider writes that a recent shift from rural labor surplus to deficit in China could mean slower growth and higher inflation for the Middle Kingdom, and those problems could ripple to countries like China’s biggest customer, the United States.

Huang Yiping and Jiang Tingsong of China’s Center for Economic Research at Peking University write in a recent report that a shift from a rural labor surplus to a labor deficit, productivity, and savings rates could collapse in China.

Those are, of course, the twin pillars of China’s economic success over the past two decades. And that kind of news in China is already being felt by business here in the U.S.

And here’s another result of China’s labor shortage that should sound familiar to U.S. businesspeople. It has led a number of Chinese businesses to look to the south for illegal immigrants to fill jobs natives don’t want.

Except in China’s case, the illegals are Vietnamese workers coming across the border to work in Chinese factories, Than Nien News reports. At one fan-making factory in Guangdong’s Foshan City, 100 out of 1,000 employees were Vietnamese.

And the labor shortage may even end the long-hated one-child policy in China.