The Chinese threat to American jobs has been exaggerated, says David Arkless. Companies should focus on what they can do to be better employers
Economic growth is impossible without people. It is a fact. People fuel economies through work and spending. At a micro level, you and I make an important contribution to our national economies. However, as the world changes, so do the complexities of increasing this contribution. Employers are finding it harder than ever to maintain an efficient workforce when the environment in which they operate is constantly changing.
No economy is evolving as quickly as China’s. Over recent years, it has been fascinating to watch this powerhouse grow, to witness the challenges that employers in China are facing and their constant need to metamorphose with no end goal in sight.
Their job is not an easy one, and it will only get harder. Ten years from now China will be the largest market in the world for consumer goods. Its economy is growing by about 8% to 10% a year and, by 2020, China will need 1.1 billion workers to help it operate effectively.
It is therefore essential that training and development programmes to build this workforce be synchronized with the evolving economy. Keeping pace with the demand for skilled labour is already proving difficult. China is estimated by McKinsey & Company, a consulting firm, to have produced 3 million graduates in 2005. The equivalent in highly-developed America is just 1.3 million. Despite this huge pool of potential employees, multinationals in China are struggling to find the right kinds of graduates to fill their vacancies. Like many countries, China faces a seeming paradox: a skills shortage amid plenty.
East and West
Poor English language proficiency continues to be one of the key reasons for this, indicating a growing need for further improved English language training by schools and universities in China. In 10 years, however, employers will need to regroup and look for people fluent in a different language, namely Mandarin. Indeed, Mandarin may be the global business language of tomorrow, with its platform in the huge domestic Chinese market.
In this respect, to be truly effective in preparing for the future, the increasing number of western educational institutions setting up in China will need to blend western business techniques and language offerings with Chinese cultural attributes and trends. This will further improve the quality and appropriate educational attainment of the Chinese population.
Employers in China are finding it difficult to source people who are job-ready. Many potential candidates, such as graduates fresh out of university, lack the practical skills required to allow them to walk into their new jobs. Cultural acceptance of vocational training, or what is often viewed as a second-class education, could help relieve this. Vocational education prepares learners for careers or professions that are traditionally non-academic and directly related to a trade, occupation or vocation. But cultural acceptance, as we know from experience in the west, will not happen overnight.
Developing a well-functioning labour market in China is a major challenge. Fortunately, the Chinese government and international organizations are increasingly joining forces to help employers overcome their recruitment problems. Manpower, a US-based employment services company, has recently joined efforts with the Chinese labour authorities to help governmental agencies, state-owned enterprises and foreign companies to transform the effectiveness and efficiency of their employment systems and services. By doing so, we are one step closer to making the right kind of people available for the jobs that need to be filled.
However, public-private partnerships such as these cannot mask the growing war for talent that is engulfing China. Middle managers are scarce in China, yet they are an essential ingredient for western multinationals and the management structures they have brought with them.
Furthermore, although multinationals were generally viewed as more attractive employers, Chinese small to medium-sized enterprises (SMEs) are growing rapidly, paying increasing salaries and adding fuel to the war for this local talent.
Local authorities in China have been quick to see the potential for growing the economy organically through SMEs. Manpower has been working with Shanghai’s city fathers, helping them to harness the latest technologies and techniques to identify and support those entrepreneurs with the greatest potential to develop their own businesses. We will provide web-based screening and assessment services for entrepreneurs who are seeking government support to start new businesses across the city. We expect to assess some 20,000 potential entrepreneurs each year, with the aim of increasing the number and quality of successful graduates from the city’s excellent vocational training programmes.
No more jobs flight?
In theory, China’s internal economic growth could also assuage fears about a flight of jobs from higher wage economies, such as America’s. How might this work?
It is predicted that between 2005 and 2015, American companies will move 3.3 million service jobs to lower-cost countries. According to McKinsey, multinationals could cut costs by 70% by implementing a global labour strategy. However, a recent survey of information technology outsourcing says that 30% of customers are dissatisfied with the result.
In effect, there are competing forces at play. One view has it that all manufacturing jobs will move out of the developed countries.
But there is growing evidence of rapidly rising wages in developing countries that points to talent shortages and, therefore, an inability to handle higher levels of outsourcing. The minimum wage increases in Chinese cities illustrate this point (see table).
The reality is that customer-intimate jobs cannot be based offshore. Also, only a small percentage of jobs will go. By 2008, 4.1 million jobs will be sent offshore from developed countries. As a comparison, in America, some 4.6 million people start work with a new employer every month, according to the McKinsey Global Institute.
The real lesson to be learned is that America and other developed markets have lost basic production jobs not to China or India, but to productivity. Employers need to find a way to improve developed-country productivity, which will ultimately reduce costs, improve output and keep jobs local.
Today, American employers, like those in other developed countries, are battling to keep their employees loyal to their organizations. The average American has about nine jobs between the ages of 18 and 34. This is an expensive exercise for any organization.
There are plenty of ways, however, to reduce attrition, such as providing good benefits, promoting a better work-life balance – including the encouragement of home employment – and training and development programmes. These are simple solutions that improve motivation and job satisfaction and, thus, increase employee loyalty.
Ultimately, regardless of where they are in the world, employers will need to change with the times to remain competitive and thereby help fuel their national economies. Sure, employers in developing countries such as China will be running to keep up with the constant change symptomatic of their unprecedented growing economies. But employers in the developed world will also be required to adapt their methods, dealing with their workforces in a creative way in order to maintain the optimal working environment locally.
The developed world simply cannot afford to become complacent, and the development issues that fast-track economies such as China are facing have helped remind us of that.
CV David Arkless
David Arkless is senior vice-president, Manpower.