Study On The Rising Labor Costs And The Restructuring And Development Of Our Labor-Intensive Manufacturing

As an important factor of production inputs, labor plays an important role in economic development. China has a large population and abundant labor resources, it makes China has the advantage of low labor costs, the advantage makes our rapid development of labor-intensive manufacturing, and offers long-term prosperity of China’s exports. In the 21 st century, the growing trend of rising labor costs significantly, China’s southeast coastal cities have a shortage of labor, Labor-intensive manufacturing enterprises’ profit is declining, and labor-intensive manufacturing’s exports are also impacted, many small and medium sized enterprises have operating difficulties and face the threat of closure. In this context, the study on the trend of rising labor costs and causes, current situation and the development of labor-intensive manufacturing relationship between the two is particularly important. This article is based on the previous studies, and analyses the trend of rising labor costs and labor-intensive manufacturing’ status. On this base, this article analyses the labor costs have impacts on labor-intensive manufacturing empirically. Finally, draws conclusions and proposes appropriate policy recommendations for existing problems.In this paper, the technical route from theory to empirical then Countermeasure,and I’m trying to analyze China’s labor costs on labor-intensive manufacturing and draw the appropriate conclusions. Specific process is as follows:First, the paper is based on the Heckscher-Ohlin’s Factor Endowment Theory, Michael Porter’s Theory of Competitive Advantage and Yifu Lin’s New Structure Theory, and it summaries the researches on reasons for rising labor costs and the impact on labor-intensive manufacturing. Second, based on the theory and literature studies, the paper analyses the trend of rising labor costs from three aspects: rising of labor compensation, increasing of each regional minimum wage and comparison with other countries about labor costs. And it puts forward three reasons for rising labor costs, namely the change of labor supply and demand, rising of living costs and external pressure applied in other industries. Third, the paper analyzes current development of labor-intensive manufacturing industries using the three indicators: industrial added value, labor productivity and profitability. Fourth, the paper uses the empirical analysis method, it selects time series data from year 2002 to 2013 and analyses the impact of rising labor costs on labor-intensive manufacturing from two aspects about profitability and foreign trade. The empirical analysis shows, In terms of profitability, rising labor costs reduces the profit margins of labor-intensive manufacturing, And it has more prominent impacts on small businesses. In terms of foreign trade, Although the exports of labor-intensive manufacturing are increasing, rising labor costs make exports growth rate and the exports proportion decline, and it shows the downward trend in foreign investment.After the study we find, rising labor costs have the negative impacts on labor-intensive manufacturing from two aspects about profitability and foreign trade. From a development perspective, a part of labor-intensive manufacturing develops to capital or technology-intensive manufacturing, a part of manufacturing shifts to central and western China or abroad, another part of the industries of high energy consumption and low efficiency are eliminated. For each part of the problem encountered, the paper proposes appropriate policy recommendations. First, the government should develop educational incentives and train the qualified labor, so it can provide the human capital for market. Second, the government can support the public infrastructure and funding for central and western regions to undertake the transfer of industries. Third, the government can increase the intensity of scientific research and provide technical support for labor-intensive manufacturing industries. Fourth, the government should reform the household registration system and abolition the restrictions on free movement of labor, so that it can provide a stable supply of labor for labor-intensive manufacturing. Fifth, the government should settle the labor force out of business reasonably.