Via The China Law Blog, an interesting commentary on the impact of rising wages in China:

One of the things that I love about my job is hearing about the next big thing. Most next big things never actually become a big thing, but the fun is in the sorting. It seems that any time I get together with a client, the discussion invariably turns to the “next” country, with “next” country very roughly meaning the country where manufacturers will move to reduce their costs. Implicit in all of these discussions is that the “next” country has an almost unlimited capacity to supply sufficient low cost labor to step in as a China replacement.

But of course this assumption is silly, as was brought clearly to light by a recent FT Beyond Brics post, entitled, “Fewer, more demanding workers for Vietnamese factories.” The post focused on recent labor strikes in Vietnam and on how it is getting increasingly difficult to staff factories there:

Prices of food and accommodation are rising faster than wages, making countryside dwellers reluctant to take factory jobs in far-away cities and industrial zones. That has led to a significant labour shortage in the electronics and garment making industries, according to the Vietnamese government.

“Some people tell us they would rather engage in petty trade than work in factories,” says Jonathan Pincus, an economist who runs Harvard University’s Vietnam programme in Ho Chi Minh City and has been researching labour issues. “It’s hard work, with unpleasant conditions, a lot of forced overtime and little freedom.”

Some Japanese manufacturers, who dominate the industrial parks of northern Vietnam, have found it difficult to hire enough workers of late, especially for bigger factories with more than 300 employees, says Hirokazu Yamaoka, head of Japan’s trade promotion body in Hanoi.apanese employers have noticed that Vietnamese workers have been getting more selective about factory jobs, he says, weighing up working conditions as well as pay. Factories without air conditioning and those that use potentially hazardous chemical processes are particularly unpopular.

The article goes on to quote an employer on wages potentially hitting “unsustainable” levels and then discusses how employers “have started offering more generous inducements to lure workers, such as free monthly sacks of rice, free accommodation and annual staff holidays.”

The article then discusses how Vietnam, “unlike China” does not have large pools of migrant workers desperate for factory jobs. I hear this again and again from our clients with facilitiies in both China and in Vietnam. They tell me  hometowns/farming areas of Vietnam are typically nicer and more productive than in China and so it is much easier to hit a “tipping point” in Vietnam where the workers will simply choose to stay in or return to their hometowns, rather than keep working in the factory. They also tell me that as China’s wages and other costs continue to increase and as more manufacturing moves to Vietnam from China, Vietnam necessarily experiences the same effects.

I guess this is where Myanmar comes in. I had lunch the other day with a friend who is (I think) the only person I know who is completely fluent in Burmese. He told me of how he is getting a shockingly high onslaught of calls from companies (mostly in the pharmaceuticals business) wanting to go to Burma. My friend’s view is that it is too early/too risky. 

After that lunch, I started talking about Burma, expecting people to mostly just laugh. Wrong. Nearly everyone is intrigued and many of them have conducted “preliminary analysis.” Then just this week, no fewer than two people I know who had been talking about going to Vietnam for vacation told me that they are now considering Myanmar. One of them said it’s for vacation, but it’s also to see what is going on there “business-wise.” 

At the same time, I would be remiss if I did not mention that the new consensus is that globalization leads to declining wages and increasing inequality in the United States. For more on this, check out this New York Times article, “As Jobs Go Global, U.S. Workers Pay.“

Myanmar, the next big thing? What do you think?