Low-cost labor disappearing in southern China

After this past New Year break between 11 to 30% percent of the migrant workers did not return to many of the factories in Guangdong province, which had been one of the areas driving the Chinese economy. The annual movement of rural migrants into the factories that churn out low-cost products, requiring low skills, is clearly decreasing. It is also estimated that 70,000 factories have closed this past year and an equal number are expected to close in the next couple of years according to The Economist.

Several factors are responsible for the decrease in the number of factories closing in southern China, which contribute to the decrease in the influx of migrant labor. The costs of labor, energy, raw materials, environmental cleanup and credit have been increasing. Adding to the burden is a decrease in exports to the U.S. and other countries, in response to the economic downturn. On top of all these problems is an effort on the part of the government to force many of the grimy, low-paying factories away from southern China and into the interior, which has not benefited from the economic growth of the lat two decades. Cleaner factories which produce higher technology products and who pay higher wages, are not having problems attracting the needed labor. The government hopes that more will come in to take the place of those that have closed.

Factories are starting to open in the interior. One of the benefits is that the migrant workers are closer to home, making it unnecessary for them to be away for a whole year at a time. An additional benefit, if factories move into the interior rural areas, is that more of the benefits of China’s upward economy will also go there.