As China provides an increasing amount of manufacturing power for the United States and other countries, companies and the government like to understand the associated costs of establishing operations in the country. Reporting on labor statistics in the Peoples Republic of China (PRC) has long been a challenge for the U.S. government. To gain a better understanding, the U.S. Department of Labor, Bureau of Labor Statistics hired an outside consultant, Judith Banister of the Beijing Javelin Investment Consulting Group, to examine the data available.
One problem is the collection of data in the manufacturing environment. 2002 estimates were determined based upon partial data and a number of hypotheses. The majority of government driven data collection is in state-owned and collective-owned operations, not in the private sector.
Data Collection in rural and urban areas is completed by two different organizations within the Chinese government giving the process additional complexity, as the Agriculture Ministry and Labor Ministry do not communicate during surveying.
Additionally, the construction of the national census demonstrates bias towards agricultural labor, in that it requests employment information for the previous week and was distributed during the harvest. This reflects a lower number, as manufacturing employees who help with the harvest are counted as agriculture.
Finally, in making conversions from annual pay to hourly rates, there is no information on the average hours worked per year in the manufacturing sector. Even if this information were available, it is expected to vary from province to provine.
The Chinese government is working to improve their data collection by working with international organizations, such as the World Trade Organization.
Despite challenges in data collection, Banister found that in all sources, manufacturing employment in China has actually been decreasing since 1995. Prior to this time, however, many of these workers were surplus workers and have been either laid off or have retired as operations have become more efficient. The industries affected by these labor changes are similar to those seen in other industrialized countries: textiles, steel processing and machinery. In the private sector and in rural areas, there has been an increase.
The labor force is fairly equally split with 54% male and 46% female workers. There are differences in areas of occupation. Notably, women tend to work in lighter industrial products, whereas men are often employed as machinists, equipment operators and in upper management.
Cost of Labor
Labor compensation statistics for the Chinese manufacturing work force include not just base pay, but also housing, transportation and meals given to them. In translating wages to the dollar, the fixed 8.28 yuan to the dollar is not the only means of comparison. The “purchasing power parity” of 4.65 must be multiplied on top of the exchange rate. With all of this in consideration, the commonly held estimates of $0.56 to $0.63 per hour for wages alone are realistic.
In urban areas, unemployment estimates range from 8 – 13%, but this can reach as high as 40% in more rural areas. There are reported manufacturing shortages in some of the highest producing coastal areas, as labor mobility within the country is difficult. The cost of labor in China is expected to stay low, as long as there is an excess labor force.
This information serves as a summary of portions of Judith Banister’s 2004 paper entitled “Manufacturing Employment and Compensation in China.” Full text can be found on the Bureau of Labor Statistics website at: http://www.bls.gov/fls/chinareport.pdf