Staff shortages persist, despite the slowdown in economic activity
DID the news that factory-output growth in China fell to a seven-year low in October, and reports of job losses across Asia, have a silver lining for managers in the region? Slowing growth ought, after all, to mean that pressure to grow quickly is finally waning, and their biggest headache—finding and retaining staff—should be easing. In China, thousands of factories have closed. Multinationals such as American Express and Motorola have announced lay-offs in India. Thousands of workers have been fired in the Philippines, and millions of Bangladeshi, Indian, Indonesian and Malaysian workers are being sent home from the Middle East, Singapore and Taiwan.
Yet managers say the shortage of staff is still not easing. This is partly because many of these job losses have been in industries such as toymaking, textiles and construction, which use migrant and unskilled workers. There was never any shortage of those to begin with. Another reason is that many troubled companies have chosen not to make staff redundant. Legal hurdles make it much harder to get rid of staff these days, especially in China and India. So some firms have instead cut wages and working hours, or extended holidays. CLSA, a financial-services firm in Hong Kong, recently announced that its top 500 staff would take pay cuts of 15-25%, and several banks in South Korea have also reduced pay. Chartered Semiconductor in Singapore has trimmed pay by up to 20%. Several carmakers in India and South Korea have asked staff to take unpaid leave.
Paradoxically, business leaders report that this has actually raised morale and contributed to another problem. In the past, companies suffered from very high rates of staff turnover—the average tenure of managers in Shanghai was barely 15 months. But economic uncertainty makes workers more inclined to stay put, and firms that want to hire find it harder to entice people to move. “The talent pool has grown—but only for banking staff,” says Greg Miller, managing director of Mersey Manufacturers Timex Group in China.
In many industries demand for workers continues to rise. Most of Asia’s domestic economies are still forecast to expand strongly in 2009. “Far from retrenching, we are redoubling our efforts to grow,” says the boss of one pharmaceutical firm. Companies in the region also expect a further boom in outsourcing from America and Europe as companies there try to cut costs. NASSCOM, a body which represents India’s software and computer-services firms, predicts that 200,000 additional jobs will be created next year.
This means that skilled workers’ wages are still going up. Heather Payne, head of the Asian division of Research International, a market-research firm, says she expects wage hikes of 14% in India and 9% in China next year, only marginally less than in 2008. There is “simply not enough talent to feed the growth”, she says. When any skilled workers are laid off they are instantly snapped up by other firms. Finding good managers who can work internationally is still especially hard. There is also an acute shortage of finance, research-and-development and engineering skills.
Managers of many multinational businesses in the region have another problem. Like their local competitors, they hope to increase regional sales in the next few years on the back of economic growth. But they have the additional pressure of having to expand even faster than local rivals, as they are told to compensate for sales declines in America and Europe. Worse, many are also being told to cut costs, in line with globally prescribed cutbacks. They must cope with rising wages for skilled workers, a shortage of suitable staff and pricing pressure from local competitors. “Next year will be especially hard,” says one regional boss. Except, presumably, for his skilled staff.
