The Chinese workforce has undergone considerable change over the past several years. As the country's urban areas continue to prosper, attracting rural migrant workers, the government's efforts to maintain “social harmony” have become more challenging. Whereas 85 percent of China's population worked in agriculture in 1950, that number has fallen to approximately 50 percent today.1 A mass migration of farmers from China's hinterland continues to move east into the mega cities, in search of higher wages.

Just prior to the onset of the global financial crisis the Chinese government imposed new labor laws that had a significant impact on South China factory costs. There is now a maximum 36-hour a month overtime law, which equates to 1.8 hours per person of overtime per day. This, coupled with a mandatory five-day workweek, adds a great deal of cost pressure to factories already struggling to deliver products on razor thin margins. In addition, a new open-term worker contract clause has been established, which mandates that employees who have worked for a factory for 10 consecutive years, or two consecutive contract periods, are entitled to lifetime employment with that factory. This has resulted in cases where employers, looking for ways to circumvent the new law, are letting people go after nine years and then hiring them back on a new contract.

In 2008, just prior to the global recession, the Pearl River Delta ...

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