The Free Market Works with Labor Rates Too!

This story: Chinese factories struggle to hire is proof that the free market works with everything, including labor rates. Economics 101 tells us that when market conditions change, and the prevailing labor rates are too low, a shortage inevitably results. The Chinese factories that adapt will retain good workers. Those that don't will lose them. It's really that simple.

From the article: "The unthinkable is happening in China: This country of 1.3 billion can no longer find enough people willing to work long hours for low wages churning out cheap consumer goods for the export market." "Last year, the Chinese Labor Ministry put the factory shortfall at 2.8 million workers nationwide. Here in southern China's Guangdong Province, factories are short 1 million to 2 million workers this year, and 73% say they're having trouble filling job openings, the provincial government says." And: "Factories must learn a lesson," says Cheng Jiansan, an economist at the Guangdong Academy of Social Sciences. "There is no longer a limitless supply of workers." "The labor shortage, along with rising materials and shipping costs, has big implications for China's surging export machine and its customers in the United States and other rich countries. Factories in Guangdong and other booming east coast provinces must find cheap labor elsewhere, make do with a reduced workforce or raise wages and benefits - and hope they can pass along at least some of the higher costs to foreign customers used to rock-bottom prices."

The article is well worth the read, since it has implications for everyone as consumers and as businesspeople... (cross-posted at Framptonia)