The Sense Makers

The Economist, July 29, 2010, had a leader highlighting the rising power of Chinese workers in demanding greater reward for skilled work.  The article suggested that this was good for the world and good for China.  After digesting the article, I “sort of” agreed but could not put my finger right on the reason.

Well, a reason arrived last week when a potential client of mine canceled a meeting.  I asked what the real issue was.  He had received a message from his Chinese supplier that the orders placed could not be delivered as there were “difficulties” with the workers.

A few questions turned the light on the difficulties:

• Skilled workers are now very difficult to attract and retain.  Once you train a person, their value to the local market rises sharply and they are poached by suppliers, new entrants, competitors and substitue manufacturers;
• To retain the skills, benefits are rising.  Wages have risen from $190 a month to over $400; housing for the worker and family is required along with multiple other finge benefits.

My initial reaction was ’so what’.  This is just what made Silcon Valley such a rich cradle of new ideas – creative ideas that tumbled out as skills moved between organisations and good ideas were made better with the addition of thinking from all sorts of organisations clustered in a small arena.  Not wonderful for organisations but good for us, the consumer.  We benefited from:

• Greater choices
• Lower prices
• Tweaked imaginations that fed back into our own thinking and products.

But, I think the Chinese pressure will bring higher prices as dextrous fingers don’t bring the multiplier effect of knowledge and applied knowledge, in particular.

Our supply chains will get more expensive and supplies erratic; we will stock more, increasing inventory and finance charges; with increased inventory comes greater write-offs where product lines become obsolete before the market has time to absorb the inventory items.

Hang onto your hats – the economic roller coaster will get bumpier before settling down.

This entry was posted on Monday, August 23rd, 2010 at 10:52 pm and is filed under BlogSense. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.