China’s Labor Landscape: Debating Currency, Demanding Change

The Wall Street Journal reports that the Obama administration is optimistic that China will allow the yuan to rise with respect to the value of the dollar. Primarily, though, the benefit to both sides may be better measured in terms of political currency, given the endemic difficulties of gauging how the yawning trade deficit would be affected in the long run. (Dean Baker at the Center for Economic and Policy Research even suggested that Obama up the ante by threatening to readjust the value of the U.S. currency to tamp down the overvaluation of the dollar.)

But as the Carnegie Endowment points out, the hand-wringing over currency skirts larger macroeconomic dilemmas between the two economies: the demand and supply of labor in China’s wildly expanding economy.

In fact, while unions and politicians chafe at the anemic yuan, there are signs that the once robust low-wage workforce in China is growing leaner in some key manufacturing centers. The Journal, BBC and LA Times reported recently on a strange reversal of the labor market dynamics in cities like Dongguan, which has drawn huge numbers of migrant workers to its factories.

Across China, economic liberalization has encouraged rural residents to break from the draconian legal restrictions that have historically them virtually chained to the land. Following a pattern of movement seen in many rapidly developing societies, throngs of workers have left the countryside to pursue urban jobs in manufacturing, construction and the service sector. They are typically young people with only a basic education, subject to discrimination and mistreatment due to their status as marginal low-wage workers. The experience of China’s rural-to-urban migrants echoes that of undocumented immigrant workers in the United States, and for both groups, the recession has jolted their communities and economic prospects.

But after a generation of mass migration and seemingly bottomless exploitation, China’s roiling manufacturing centers may be turning into a buyer’s market for migrant laborers. The LA Times reported from Shanghai last month, as the city hustled to prepare for the World Expo:

Once thought to be an endless resource, the Chinese worker has suddenly become hard to find in some east coast cities, where factory bosses and real estate developers are scrambling for labor.

The shortage became glaringly apparent last month at the end of the Chinese New Year. Millions of workers headed to the countryside for the holidays, but they didn’t return.

“We may be coming to a point where China is tapped out of cheap labor,” said Patrick Chovanec, an associate professor at Tsinghua University’s School of Economics and Management in Beijing.

Anecdotal evidence suggests that some nervous employers are trying to lure in new workers with extra bonuses. On paper, it resembles a reverse mirror-image of the slashing of wages and benefits in the midst of the U.S. economic crisis:

The China Daily, the state-run English-language newspaper, said the city of Dongguan, where most of the world’s toys are manufactured, was a million workers short of its usual population of 5 million migrants. State news media have reported that cities were offering better health benefits and housing subsidies to attract more.

The Journal reported in February, ​“anxious employers have raised salaries by more than 30% but still can’t attract enough applicants.”

Could it be that well of cheap labor is finally running dry? Could it be that Chinese workers are finally in the position to negotiate better conditions and wages? Should struggling American workers be jealous, or maybe hopeful that China’s advantage in the race to the bottom may finally be fading?

For now, we don’t even know how real this supposed labor shortage is. The BBC observed that some workers are reportedly opting to stay in inland towns rather than trek to the city for work, in part because the disruption of the global recession prompted workers to think more creatively about earning a living closer to home. Government officials have offered incentives for migrants to resettle in the countryside they once sought to escape at all costs: one town offered a tax break for budding entrepreneurs.

But is this rosy picture of budding countryside entrepreneurs sustainable? It’s not the first time the Chinese government has sought to inject investment in rural areas but the gravitational pull of the cities has generally dominated the flow of capital.

Whether or not the labor ​“famine” is real, Chinese workers are no doubt facing a dramatically changing economic landscape. China Labour Bulletin recently scrutinized the claims of a labor shortage and found that by and large, there are still more Chinese workers than there are good jobs in many sectors.

Geoffrey Crothall, director of communications for China Labour Bulletin, told In These Times that workers won’t see any immediate dramatic change in their well-being: ​“I do not think these recent labour market shifts will make workers as a whole significantly richer for a while to come,” he said. ​“Maybe next year, the economy continues to grow and same trends in the market continue, you will start to see actual improvements in the basic wages of migrant workers. He cautioned against overgeneralizing about Chinese workers: ​“There are major variations across different regions, industrial sectors and demographics, and those variations are constantly shifting and changing pattern.” The seething unrest over factory layoffs and mass unemployment in remote areas like Xinjiang show that China’s workforce is characterized more by intensifying inequality rather than uniform upward mobility.

Even in the United States, the widespread abuse of migrant farm workers reveals that high demand for labor alone does not necessarily promote improvements in wages or working conditions, especially when drawing workers from a disenfranchised and impoverished population.

So if organic labor market changes aren’t keeping pace with workers needs and rights, how might a currency readjustment affect Chinese workers? ​“If the yuan does appreciate,” Corthall said, ​“it will certainly reduce China’s advantage,” but added that this wouldn’t necessarily stop the offshoring of U.S. jobs. Ultimately, ​“US business might move its production to cheaper locations,” like Bangladesh, while domestically, the potential for currency realignment to boost U.S. exports is difficult to gauge. On a global scale, Corthall argued, ​“I certainly don’t think the ​‘race to the bottom’ will end in China.”

Still, if Chinese workers are even a little more empowered now, a little more equipped to challenge employers that once treated them as faceless wage-slaves, that’s a sign that hyper-globalization may finally be lifting up China’s most marginal workers. Chinese worker activism is ticking up in many arenas, from civil litigation to hold employers accountable, to grassroots uprisings outside of the state union apparatus. Monetary policy, trade negotiations and diplomatic pressure could force top-down changes in Beijing, but in cities and villages, long-range change may trickle up from the bottom. As more migrants push back against exploitation, they could chip away at the systematic labor degradation at the core of China’s trade ​“advantage.” From inside China, reining in the race to the bottom from below could put U.S. workers on firmer and more equal footing.