Students by Millions Fill Labor Gap in China

BEIJING — In September, the largest factory in Yantai, a coastal city in northeastern China, called on the local government with a problem — a shortage of 19,000 workers as the deadline on a big order approached.

Yantai officials came to the rescue, ordering vocational high schools to send students to the plant, which is run by Foxconn Technology Group, a major supplier to some of the world’s electronics giants, including Apple, Dell and Amazon, among others.

As companies like Foxconn shift factories away from higher-cost production bases in China, like the Pearl River Delta region in Guangdong Province, they are discovering that workers in new locations across China are not as abundant as they had expected.

That has prompted multinationals and their suppliers to use millions of teenage students from vocational and technical schools on assembly lines. The schools teach a variety of trades and require work experience, which in practice means students must accept work assignments to graduate.

In any given year, at least eight million vocational students work on China assembly lines and in workshops, according to estimates from the Ministry of Education — about one in eight Chinese 16 to 18 years old. In 2010, the ministry ordered vocational schools to fill any shortages in the work force.

The country’s minimum legal working age is 16.

Foxconn, the trading name of Hon Hai Precision Industry, is based in Taiwan and is a major supplier of smartphones, computers and videogame equipment to electronics companies around the world. It employs 1.2 million workers across China. Nearly 3 percent are student interns.

The company “has a huge appetite for workers,” Wang Weihui, vice director of the Yantai Fushan Polytechnic School, told a reporter recently.

“It tightens the labor market,” said Mr. Wang, whose school sends its students to work at Foxconn and other companies.

Local governments eager to please new investors lean on schools to meet shortfalls in the number of workers. That is what Yantai, in Shandong Province, did in September when Foxconn had trouble filling Christmas orders for Nintendo’s Wii game consoles.

“It has been easier to recruit workers in the Pearl River Delta than some inland locations,” Foxconn said in a written statement in late December.

Some companies cite rising wages in southern China for the shift to other regions. Wages are a growing component of overall manufacturing costs in China, totaling as much as 30 percent of production costs, depending on the industry, according to the Boston Consulting Group.

Wages began to rise around 2006 as the migration of rural workers to Guangdong ebbed. China’s one-child policy, plus a jump in higher education enrollment, further depleted the number of new entrants to the work force, pushing wages up further.

That prompted U.S. carmakers, Korean electronics manufacturers and private Chinese firms to look for new manufacturing bases. Cheaper electricity, land and tax incentives, as well as a growing consumer class in regions beyond the booming coastal southern provinces were other reasons to relocate.

Minimum wages in Yantai can be as low as 1,100 renminbi, or $180, a month, compared with 1,500 renminbi in Shenzhen, the city neighboring Hong Kong.

What makes vocational students attractive is that they can be paid less than full-time workers, although some companies — including Foxconn — pay the same base wages.

Still, even if they pay the same base salary to both full-time staff members and interns, employers can save 10 percent to 40 percent per person because legally they do not have to pay health insurance or social security benefits for student interns.

Yantai was not the only local government to help Foxconn.

Two months earlier, Foxconn’s 100,000-worker factory near the city of Zhengzhou, in Henan Province, was racing to meet a deadline for the Apple iPhone 5.

Article source: http://www.nytimes.com/2013/01/08/business/global/students-by-millions-fill-labor-gap-in-china.html?partner=rss&emc=rss