Chinese Manufacturers Struggle as Young Workers Shun Factories

A large proportion of Chinese manufacturers faced labour shortages this year and officials have warned that they expect the shortage of factory workers will get worse in coming years.

Part of the problem that Chinese employers face is many young people prefer not to do factory work.

Growing up in a Chinese village, Julian Zhu only saw his father a few times a year when he returned for holidays from an exhausting job in a textile mill in southern Guangdong province.

For his father’s generation, factory work was a lifeline out of rural poverty. For Zhu, and millions of other younger Chinese, the low pay, long hours of drudgery and the risk of injuries are no longer sacrifices worth making.

“After a while that work makes your mind numb,” said the 32-year-old, who quit the production lines some years ago and now makes a living selling milk formula and doing scooter deliveries for a supermarket in Shenzhen, China’s southern tech hub. “I couldn’t stand the repetition.”

The rejection of grinding factory work by Zhu and other Chinese in their 20s and 30s is contributing to a deepening labour shortage that is frustrating manufacturers in China, which produces a third of the goods consumed globally.

Factory bosses say they would produce more, and faster, with younger blood replacing their ageing workforce. But offering the higher wages and better working conditions that younger Chinese want would risk eroding their competitive advantage.

And smaller manufacturers say large investments in automation technology are either unaffordable or imprudent when rising inflation and borrowing costs are curbing demand in China’s key export markets.

More than 80% of Chinese manufacturers faced labour shortages ranging from hundreds to thousands of workers this year, equivalent to 10% to 30% of their workforce, a survey by CIIC Consulting showed.

China’s Ministry of Education forecasts a shortage of nearly 30 million manufacturing workers by 2025, larger than Australia’s population.

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On paper, there is not a shortage of labour: roughly 18% of Chinese aged 16-24 are unemployed. This year alone, a cohort of 10.8 million graduates entered a job market that, besides manufacturing, is very subdued.

China’s economy, pummelled by Covid restrictions, a property market downturn and regulatory crackdowns on tech and other private industries, faces its slowest growth in decades.

Klaus Zenkel, who chairs the European Chamber of Commerce in South China, moved to the region about two decades ago, when university graduates were less than one-tenth this year’s numbers and the economy as a whole was about 15 times smaller in current US dollar terms.

He runs a factory in Shenzhen with around 50 workers who make magnetically shielded rooms used by hospitals for MRI screenings and other procedures.

Zenkel said China’s breakneck economic growth in recent years had lifted the aspirations of younger generations, who now see his line of work as increasingly unattractive.

“If you are young it’s much easier to do this job, climbing up the ladder, doing some machinery work, handle tools, and so on, but most of our installers are aged 50 to 60,” he said. “Sooner or later we need to get more young people, but it’s very difficult. Applicants will have a quick look and say ‘no, thank you, that’s not for me’.”

The National Development and Reform Commission, China’s macroeconomic management agency, and the education and human resources ministries did not reply to requests for comment.

Three Options, All Difficult

Manufacturers say they have three main options to tackle the labour-market mismatch: sacrifice profit margins to increase wages; invest more in automation; or hop on the decoupling wave set off by the heightened rivalry between China and the West and move to cheaper pastures such as Vietnam or India.

But all those choices are difficult to implement.

Liu, who runs a factory in the electric battery supply chain, has invested in more-advanced production equipment with better digital measurements. He said his older workers struggle to keep up with the faster gear, or read the data on the screens.

Liu, who like other factory chiefs declined to give his full name so he could speak freely about China’s economic slowdown, said he tried luring younger workers with 5% higher wages but was given a cold shoulder.

“It’s like with Charlie Chaplin,” said Liu, describing his workers’ performance, alluding to a scene in the 1936 movie “Modern Times”, about the anxieties of US industrial workers during the Great Depression. The main character, Little Tramp, played by Chaplin, fails to keep up with tightening bolts on a conveyer belt.

Chinese policymakers have emphasised automation and industrial upgrading as a solution to an ageing workforce.

The country of 1.4 billion people, on the brink of a demographic downturn, accounted for half of the robot installations in 2021, up 44% year-on-year, the International Federation of Robotics said.

But automation has its limits.

Dotty, a general manager at a stainless-steel treatment factory in the city of Foshan, has automated product packaging and work surface cleaning, but says a similar fix for other functions would be too costly. Yet young workers are vital to keep production moving.

“Our products are really heavy and we need people to transfer them from one processing procedure to the next. It’s labour intensive in hot temperatures and we have difficulty hiring for these procedures,” she said.

Brett, a manager at a factory making video-game controllers and keyboards in Dongguan, said orders have halved in recent months, and that many of his peers were moving to Vietnam and Thailand.

He is “just thinking about how to survive this moment,” he said, adding he expected to lay off 15% of his 200 workers even as he still wanted younger muscles on his assembly lines.

Aspirations of Better-Educated People

The competitiveness of China’s export-oriented manufacturing sector has been built over several decades on state-subsidised investment in production capacity and low labour costs.

The preservation of that status quo is now clashing with the aspirations of a generation of better-educated Chinese for a more comfortable life than the sleep-work-sleep daily grind for tomorrow’s meal their parents endured.

Rather than settling for jobs below their education level, a record 4.6 million Chinese applied for postgraduate studies this year. There are 6,000 applications for each civil service job, state media reported this month.

Many young Chinese are also increasingly adopting a minimal lifestyle known as “lying flat”, doing just enough to get by and rejecting the rat race of China Inc.

Economists say market forces may compel both young Chinese and manufacturers to curb their aspirations.

“The unemployment situation for young people may have to be much worse before the mismatch could be corrected,” said Zhiwu Chen, professor of finance at the University of Hong Kong.

By 2025, he said, there may not be much of a worker shortfall “as the demand will for sure go down.”

‘You Feel Free’

Zhu’s first job was to screw fake diamonds into wristwatches. After that he worked in another factory, moulding tin boxes for mooncakes, a traditional Chinese bakery product.

His colleagues shared gruesome stories about workplace injuries involving sharp metal sheets.

Realising he could avoid reliving his father’s life, he quit.

Now doing sales and deliveries, he earns at least 10,000 yuan ($1,421.04) a month, depending on how many hours he puts in. That’s almost double what he would earn in a factory, though some of the difference goes on accommodation, as many factories have their own dorms.

“It’s hard work. It’s dangerous on the busy roads, in the wind and rain, but for younger people, it’s much better than factories,” Zhu said. “You feel free.”

Xiaojing, 27, now earns 5,000 to 6,000 yuan a month as a masseuse in an upscale area of Shenzhen after a three-year stint at a printer factory where she made 4,000 yuan a month.

“All my friends who are my age left the factory,” she said, adding that it would be a tall order to get her to return.

“If they paid 8,000 before overtime, sure.”