Shenzhen wage hike causes supply chain jitters
Local gov may raise minimum wage for sweatshop toilers
Chinese tech hub and boom town Shenzhen is set to increase the minimum wage of workers there by 13.3 per cent in early 2013, causing a few sweaty palms in the technology supply chain.
Shenzhen and the wider Pearl River Delta area in southern China is one of the most concentrated technology manufacturing hubs in the world. Samsung, Apple, HP, Dell and Nokia all have kit built here by the big Taiwanese ODMs such as Foxconn and Wistron.
Now the word in Shenzhen is that the local authorities are planning to raise the monthly minimum wage from 1,500 to 1,700 yuan (£149-169) sometime during early 2013, according to Digitimes. The paper’s sources added that once insurance and benefits are included, actual monthly employment costs are as high as 2,700-2,800 yuan (£268-278).
This won’t affect Foxconn – which is one of the most generous employers of its kind in China, offering an entry-level wage of 1,800 yuan – but it may have an impact on the smaller manufacturers further down in the supply chain, which operate at tighter margins.
As for whether the wage hikes will result in more expensive products, labour is still a small percentage of a gadget’s final cost. However, tech firms HP and Dell have voiced concerns in the past over salary increases.
Although the central government sets the rules for minimum wage in China, local authorities have the discretion to push the figure higher if they wish.
However, increasing numbers of manufacturers in China are relocating from the Pearl River Delta to places like Chengdu in the south-west, partly because of rising wage bills.
The irony, of course, is that despite these wage hikes, workers in plants such as Foxconn still barely have enough to live on once accommodation and living expenses are deducted.
Gartner research director, Roger Sheng, told The Reg that higher salaries are unlikely to force large scale relocation out of China, given the growing maturity of the supply chain there and the huge domestic market.
"Foxconn is saying it is moving to outside China but actually it is building the biggest factory zone in Henan province for increasing iPhone orders," he added. "Other countries need to invest in the infrastructure and education systems to attract electronics manufacturers to move from China before launching aggressive policies." ®
Not entirely sure why a 14% pay rise should worry anyone. Especially a nominal, pre-inflation, one.
Real wages, that is post-inflation, for Chinese manufacturing workers have been rising at 14% a year for more than a decade now. That's why they're four times higher now than they were in 2000.
I am very dubious of the cousin in this article that salaries and benefits are largely clawed back by employers. I suppose it does happen in some cases. However, the Shenzhen job market is very much a buyers market. Any perceived trickery like that results in workers abandoning your plant for one down the road with better net salaries.
The' slave labour' meme makes for good stories, but it's dreadful journalism.
A more accurate story would conclude that factory workers in Shenzhen do pretty well, given the cost of living, though are starting to be squeezed a bit by inflation.
However, that story would hko against the
Cost of Living.
"The irony, of course, is that despite these wage hikes, workers in plants such as Foxconn still barely have enough to live on once accommodation and living expenses are deducted"
Just like many in the UK & US then?