When I saw the headline “The Next China Problem To Freak Out About: A Shrinking Labor Pool” on Yahoo Finance, I had to read the associated article. What was even more insightful than the article was the accompanying video. The video described a couple of demographic changes happening in China that may affect you if you source in that country.
First, Jeff Matthews, a hedge-fund manager at RAM Partners, described the effect on the workforce of China’s 1978 law that “restricts the number of children married urban couples can have to one” (Wikipedia). A generation after this law has been enacted, we are now starting to see a significantly smaller number of Chinese individuals entering the workforce compared to years past.
Second, Matthews described infrastructure development in the western part of China that is luring workers away from manufacturing jobs in the “dark, sweaty, noisy, awful [factories] 500 miles from [where workers actually live]” in the southeastern part of China.
Combined, these factors seem to suggest that China is not what it used to be from a sourcing perspective. So, where should one source? Is there another country ready to take China’s place as the go-to place for low cost country sourcing?
Matthews says “Vietnam has only 80 million people…Vietnam alone is not the answer. India has a horrible infrastructure, that’s not the answer right now…One way [companies will source in the near future] is ‘spreading it around’: a plant in Vietnam, a plant in, say, Czech Republic…a plant in Latin America…[The macro-economic change that affects global sourcing choices] probably lifts manufacturing worldwide, instead of sucking it all into China.”
Interesting food for thought. So, if there is a labor shortage in China, where will you move your orders to?
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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