Made for change
Chang'an remains a rough-hewn industrial district in many respects. The smog is thick and rolling electrical blackouts are the norm. Although Jetson International Ltd., one of RC2's dedicated factories, uses rudimentary automation to produce wooden Thomas trains and track, workers still toil in the 90-degree heat with nothing but paper surgeon's masks protecting them from sawdust and other hazards. Wages have been rising, but they are still puny by Western standards. Production workers in Dongguan earn less than $150 a month.
Nevertheless, signs of change are everywhere. A five-star hotel has arrived, restaurants have blossomed and office towers are on the rise. The real growth is coming from computer-parts factories that are as modern as any in the world.
Wynnewood's Chan remembers paying workers $6 a month in the years after Deng Xiaoping opened the south for development in 1978. Even in 1989, he had to argue with his Chinese partners about putting in a fire escape in a multistory worker's dormitory with only one exit.
"I wasn't even asking them to pay for it," Chan said. "The value of life was very different at that time."
Robin Munro, research director for the China Labour Bulletin in Hong Kong said labor conditions remain primitive by U.S. standards. Dormitories are still crowded, long hours of overtime are still expected and worker safety remains a distant concept. But Monro also said the pendulum is swinging. The Pearl River Delta has developed such a dismal reputation that as industry develops inland, workers increasingly head home or never leave. That has created a labor shortage of 12 percent to 15 percent in the region.
Made at a price
At the Chitone labor market near Dongguan's gleaming new civic center recently, the shift was obvious in the interplay between potential employers and job seekers packed into the market's top two floors.
At one booth sat 28-year-old Li Jun, whose company makes plastic bags for supermarkets around the world. On this day, he was looking for office staff. But two months earlier he had been forced to hire an agency to travel inland to recruit factory workers to fill out the company's staff of 280.
Li said the worker shortage had driven wages up around 30 percent over the last three years. Production workers used to get around $100 a month. Now they are paid closer to $140. Retaining workers also means improving living conditions, albeit from rock bottom standards.
Li explained that in March his company added hot water to the dormitory bathrooms and put in air conditioning. The owners hired a cook to replace the meal service because workers were complaining about the food quality. The company bought a snooker table, a big movie projector for the dining
room and started regular exercise periods.
Another manufacturer, Minoya Sharehold Co., was also pushing lifestyle amenities. "We have a beautiful environment," said a colorful sign, noting the company's Ping-Pong and snooker room, as well as its basketball, volleyball and badminton courts.
But Yang Jianjun, a 25-year-old quality control manager, wasn't buying. Minoya was offering almost $190 a month plus overtime for quality control positions. Yang's price was closer to $270.
"I think the salary is too low," he said. " I don't think it would motivate me to work there."
Labor costs at Gu's HK (Shenzhen) Industries Ltd. have jumped by half over the last several years. But that's just the beginning. ABS plastic, a basic raw material in model cars, has more than doubled. Nickel, the key ingredient in batteries, has rocketed from around $16,000 a ton to almost $47,000. Meanwhile, everything has been made more expensive for exporters by the government's policy of letting the value of the yuan float higher in response to U.S. complaints about its trade deficit with China.
Safety, too, comes at a cost. Even before the toy-quality scandals, Gu said, he constantly worried about getting slipped lead paint by a supplier looking to shave pennies. So he demands certification from suppliers and insists they sign contracts taking full responsibility for a recall. He also makes sure he buys from large, established companies. All of this helps him sleep at night. But it also means he pays top dollar for paint.
A few years ago, he said, Mattel came to him and expressed strong interest in hiring HK to build a branded line of radio-controlled toys. The two sides had several meetings and talked about designs. But, in the end, they didn't come to terms because Gu couldn't afford it.