Sat, Jan 12, 2013 - Page 9 News List

Use of student interns highlights China’s labor shortage

As major companies relocate away from the relatively high-cost Pearl River Delta, they are having to find new workers to meet demand

By Lucy Hornby  /  Reuters, BEIJING

Illustration: Constance Chou

In September last year, the largest factory in the northeastern Chinese coastal city of Yantai called on the local government with a problem — a shortage of 19,000 workers as the deadline on a big order approached.

Yantai officials came to the rescue, ordering vocational high schools to send students to the plant run by Foxconn Technology Group, a Taiwanese maker of smartphones, computers and gaming equipment.

As firms like Foxconn shift factories away from higher-cost centers in the Pearl River Delta in southern Guangdong Province, they are discovering that workers in new locations across China are not as abundant as they had expected.

That has prompted multinationals and their suppliers to use millions of teenage students from vocational and technical schools on assembly lines. The schools teach a variety of trades and include mandatory work experience, which in practice means students must accept work assignments to graduate.

In any given year, at least 8 million vocational students man China’s assembly lines and workshops, according to Chinese Ministry of Education estimates — or one in eight Chinese aged 16 to 18. In 2010, the ministry ordered vocational schools to fill any shortages in the workforce. The minimum legal working age is 16.

Foxconn, a subsidiary of Hon Hai Precision Industry, employs 1.2 million workers across China. Nearly 3 percent are student interns.

The company “has a huge appetite for workers,” Wang Weihui, vice director of the Yantai Fushan Polytechnic School, said during a recent visit to the city.

“It tightens the labour market,” said Wang, whose school sends its students to work at Foxconn and other firms.

Local governments eager to please new investors lean on schools to meet any worker shortfall. That is what Yantai, Shandong Province, did in September when Foxconn had trouble filling Christmas orders for Nintendo Wii game consoles.

“It has been easier to recruit workers in the Pearl River Delta than some inland locations,” Foxconn said in written comments late last month.

Some companies cite rising wages in southern China for the shift elsewhere. Wages are a growing component of manufacturing costs in China, making up to 30 percent of the total depending on the industry, according to the Boston Consulting Group.

Wages began to rise around 2006 as the migration of rural workers to Guangdong ebbed.

China’s one-child policy, plus a jump in higher education enrollment, further depleted the number of new entrants to the workforce, forcing up wages.

That prompted US carmakers, Korean electronics manufacturers and private Chinese firms to look for new sites. Cheaper electricity, land and tax incentives as well as a growing consumer class in regions beyond the booming southern coastal provinces were other reasons to relocate.

Minimum wages in Yantai can be as low as 1,100 yuan (US$180) a month, compared with 1,500 yuan in Shenzhen, a city near Hong Kong.

What makes vocational students attractive is they can be paid less than full-time workers, although some firms — including Foxconn — pay the same base wages.

Even if they pay the same base salary, employers can save 10 percent to 40 percent per person because legally they do not have to pay health insurance or social security benefits for student interns.

Yantai was not the only local government to help Foxconn.

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