Is It Feasible To Save Labor Costs?

Mr. Zeng, a manager of wool textile foundry in Dalang town of Dongguan, plans to move the company to the mainland a few years ago, but up to now, the relocation of enterprises has not yet been completed.

Although different provinces and cities in the mainland started fighting for the relocation of the enterprises in the early years, and issued a relatively preferential policy, the foundry enterprises began to hesitate when they really implemented the industrial pfer. Why?

As we all know, OEM enterprises are mainly distributed in textile, clothing, toys, shoes and hats, electronics and other manufacturing industries, and the foundry links are mostly labor intensive manufacturing.

The migration of OEM enterprises has been preceded by a precedent. The migration routes are always from developed areas to relatively undeveloped areas, which brings about the pfer and acceptance of industries.

It can be seen that the related industries have moved from the initial European and American regions to Japan, Korea, China, Taiwan and other countries and regions, to the Pearl River Delta and the Yangtze River Delta region, and now to the inland areas of China.

In the 80s and 90s of last century, industrial migration in Hong Kong, Macao and Taiwan promoted the rapid development of the processing trade in the Pearl River Delta region.

It is generally believed that the majority of OEM enterprises move to meet the pressure of rising staff costs, because the cost of labor in the mainland is obviously cheaper than that in the coastal areas.

Take the wages of the employees of the general foundry enterprise in Dongguan as an example. After the employee has worked for 3 months and has passed the examination, the basic salary will be around 1500 yuan.

At present, the highest level of a minimum wage in a province in the mainland is only 800 yuan, which is 300 yuan lower than the minimum wage in Dongguan.

If it is a factory with 30 thousand employees, if it is paid in accordance with the minimum wage, it will also save labor costs of about 1.5 billion a year.

If the migration is only from the perspective of saving labor costs, the long-term effect is not good enough.

This is because: first, it is said that the basic salary of local employees is also a wage standard of 1200-2000 yuan when the OEM enterprises move inland.

In this way, the cost of labor can not be saved after the relocation of the enterprise.

On the other hand, even if the enterprise does not implement Shenzhen's wage standards after its relocation, the wage gap is relatively small and continues to shrink due to the convenience of exchanges between the mainland and the coastal areas.

In July 1st, many provinces in the mainland adjusted the minimum wage standards, and some areas increased by more than 20%.

Therefore, even though there are some differences between the cost of labor between the coastal and the mainland, the difference will disappear in a long time in the future.

If the cost of large-scale relocation and reconstruction is taken into account, the sunk cost of relocation will be very large.

If enterprises are still guided by exports, then the cost of supporting and pportation will increase and the delivery time will also lengthen, so the overall interests of enterprises will probably outweigh the gains.

From another perspective, if the enterprise regards saving labor costs as the main motive for moving inland, it may be that "sesame" has lost the "watermelon".

At present, China's manufacturing and OEM enterprises mainly have a dilemma: excessive wage will weaken the cost advantage of enterprises, and the low wages are contrary to the direction of decent life and dignity.

However, Chinese manufacturing and OEM enterprises will come out of the cheap labor force sooner or later. Any attempt to maintain or slow down the manufacturing cost of low labor costs will have no way out.

No matter how far the cheap labor era can go, the labor-intensive enterprises, especially the foundry enterprises, will be faced with great challenges.

We must accept the law of economic development: industrial pfer is not one-way, while China accepts the industrial pfer of developed countries, it also needs to pfer the relatively backward low-end industries to other countries or regions.

At the same time, China's manufacturing enterprises and OEM enterprises are the only way out in the future.

The pformation of manufacturing enterprises, including foundry enterprises, first of all is to fairly raise the wages of employees, so that employees can work and live respectfully, and enhance their purchasing power. It is important for employees to fully share the fruits of their work.

More importantly, the manufacturing industry still needs to gradually shift and close to the service industry, so that the manufacturing industry itself can enjoy the reasonable interests of the whole value chain of design, purchase, manufacture, pportation and marketing.

At the same time, the whole society should not take pride in the "world factory" as a goal and strive to change the "largest factory in the world" as the "largest world market".

But if the performance of an enterprise is always based on overloaded labor, the vitality and competitiveness of the enterprise will be derogatory and development will not be sustainable.