Companies & Industries

China's Worker Shortage Is a Global Problem


Workers make final inspections on the production line at Geely Automobile Holdings' factory in Cixi, Zhejiang Province, China

Photograph by Tomohiro Ohsumi/Bloomberg

Workers make final inspections on the production line at Geely Automobile Holdings' factory in Cixi, Zhejiang Province, China

If there’s one thing China has plenty of, it’s people—right?

Well, not exactly. With China’s economy expanding at a solid and sustainable 7.8 percent last year, many Chinese companies are having trouble recruiting and retaining the workers they need.

As recently noted in The Wall Street Journal, “the Federation of Hong Kong Industries, a trade group for manufacturers in China, says about 80% of its members are having problems recruiting workers.” Keeping them after they get them is another problem. Wage increases alone are no longer enough. Companies are trying everything to win the hearts and minds of their increasingly mobile and independent-minded workers.

As the global economy recovers from its long malaise, the challenges will grow. If the U.S. Congress approves comprehensive immigration reform, somewhat of a long shot at this stage, the competition for talent will increase even more. We could see global bidding wars for the best, the brightest, and the hardest working; don’t bet against it.

When we wrote “GLOBALITY: Competing with Everyone from Everywhere for Everything” some five years ago, we predicted, among other things, that the competition for skilled workers and management talent would increase significantly in the coming years. Little did we realize how quickly everyone would feel the pinch.

Much of the story, as we suggested then, has to do with demographics. According to China’s National Bureau of Statistics, the country’s working-age population—which includes all able-bodied individuals between 15 and 59—was 937.3 million in January 2013. That would seem more than enough. But pull the camera back and use a wider lens, and you see a different picture: The 937 million was nearly 3.5 million fewer than the year before.

With China’s one-child policy, which some are rethinking, the trend is both unmistakable and ominous.

Make no mistake: The challenge is global. Despite Europe’s continuing economic woes, including extraordinarily high rates of unemployment, similar long-term trends can be seen there.

Consider Germany, the lynchpin of the EU economy.

A recent study from the Robert Bosch Foundation in Stuttgart, as reported in the Financial Times, estimates that aging and population decreases could shrink the German workforce by as much as 12 percent by 2030. Already, according to the CIA World Factbook, the median age of Germany’s population is 45.7 years, more than eight years greater than the U.S. median age. Other current estimates include 40.6 in France, 44.2 in Italy, 41.3 in Spain, 42.4 in Sweden, and 40.3 in the U.K. Japan’s median age is even higher: 45.8.

By comparison, China looks youthful at 36.3. But the population is aging rapidly, and the one-child policy offers no relief. So employee recruitment and retention become more important and more competitive every year.

Germany is fortunate right now. With the overall EU unemployment rate over 12 percent, they can import skilled workers from elsewhere. But this provides only temporary relief. When demand increases elsewhere, Germany will have the same problem as everyone else.

While demographics isn’t everything, talent acquisition should be near the top of every executive’s long-term planning agenda: How many and what types of workers will we need in the future, and where are we going to find them?

Hal_sirkin
Harold L. Sirkin is a Chicago-based senior partner of The Boston Consulting Group (BCG), a professor at Northwestern University’s Kellogg School of Management, and co-author, most recently, of The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback (Knowledge@Wharton, November 2012).

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