What’s Does The Future Hold for China in Face of Rising Labour Costs?

China, which has been making hay in the automotive industry while the exchange rate sun shines for some time, may be seeing the early stages of its end as the low cost leader.
While there have been signs over the recent years that the desire for workers to have higher wages, better conditions, and more “Western” amenities at home and in the workplace, recent events have brought the entire issue to the forefront.
In the past week Honda and its suppliers have been paying the price for labourers seeking to raise their wages and improve their conditions.
Workers at Foshan Fengfu Autoparts Co. walked off the job earlier this week, seeking pay raises, just days after Honda settled a two-week strike at a wholly owned parts supplier that had forced the Japanese automaker to halt production at all four of its Chinese assembly planst due to a lack of parts.
Workers at a second auto parts factory in China affiliated with Honda Motor Co. walked off the job Wednesday.
The latest labour dispute was at Honda Lock (Guangdong) Co., in Zhongshan, a city near Honda’s production base in the southern city of Guangzhou.
This forced the company to stop production at two of its assembly plants, although Honda said that production at its two car plants would remain suspended Thursday due to “labour negotiations” at parts maker Foshan Fengfu.
Production at Honda’s other two China car assembly plants was not affected because they had a sufficient supply of parts on hand, the company said.
The conflicts reflect rising tensions between workers and foreign companies that rely on China as a source of cheap labour and a fast-growing market. Companies in China are finding it harder to attract and keep workers, who are demanding better pay and working conditions, say reports.
Wage disputes and strikes are not uncommon in China, but have attracted more attention recently following 11 suicides and three suicide attempts – mostly by jumping off tall buildings – at Taiwan’s Foxconn Technology Group, a contract manufacturer in China of iPhones and other name-brand electronics.
Labour activists accuse Foxconn of having a rigid management style, an excessively fast assembly line and forced overwork. The company denies the allegations, but did announce two raises for its Chinese workers. It also is installing safety nets around buildings and hiring more counsellors.
While suicide as a reaction to wages or working conditions is extreme under any circumstances–let’s hope that doesn’t become a popular trend–it does serve to underline the severity of the situation.
And, with costs already rising in China, it does raise the question of how much savings need to be on the table for foreign companies to stay once workers start killing themselves.

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