China labour costs
Eoin Treacy's view Mrs Treacy visited a number of factories this month in Zhejiang and Guangdong provinces of China. A common theme was evident, just about all were experiencing staff shortages which was stretching the lead time to delivery. A number reported employees simply didn't return from the New Year holiday. This trend has been evident for some time because yearend bonuses get paid before the holiday, making it the ideal time to change jobs. However, when we visited Shenzhen technology companies, which typically pay approximately 20% more, they were experiencing no such difficulties.
The high profile suicides of workers at Foxconn last year forced the sector to raise wages and improve conditions. This made it particularly alluring to those seeking work, since lower margin businesses are either unwilling or unable to follow suit. This trend is also evidence of China's steady progression up the value chain in terms of manufacturing. Low end manufacturers will either have to raise wages, improve productivity or move to a jurisdiction where lower wages for semi-skilled work can be found. Increasingly Indonesia, Vietnam and India are benefitting from the migration of low end manufacturing.