Hr 590 Week 5

DM

Case Paper # 2: How Rising Wages are Changing the Game in China (p. 518)

HR 590

November 28, 2009

The phrase “cheap labor” has been synonymous with the country of China for decades, until recent developments related to labor shortages and wage increases have arisen. The article “How Rising Wages Are Changing the Game in China” from our text addresses several key points relative to the labor shortage and the increase in wages recently seen in China. One point addresses the challenges of finding and retaining good workers, and the changes some companies are making to improve employee retention during this era of substantial wage increases. In addition, turnover is addressed as the turnover rate continues to soar as companies make an attempt to compete amongst each other for top talent. Education and training is also addressed as a means to increase skill-set among Chinese workers. Companies such as Motorola and Intel Corporation have begun making efforts to train those either still in school or those who have recently graduated in order to ensure a workforce designed specifically to meet their needs. Another point addresses a “breaking point” for companies currently engaging in business in China. As labor costs continue to rise in heavily populated cities (such as Shanghai and Suzhou), many manufacturers are beginning to look elsewhere for potential sites of development in which wages will be lower.

The labor shortage currently being experienced by the country of China has a direct connection with compensation, which has been linked to turnover. While the article does not specifically address the point as to how the wage increase spiral began, we can presume that this increase occurred over a period of time and that it did not occur overnight. Competing on the basis of labor cost can be a source of competitive advantage for a company. By paying wages above market value, a company will have the ability to obtain and retain talented employees,...