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OM in the News: And China Outsources to— Ethiopia?

June 5, 2017

Workers on an assembly line at a Huajian International shoe factory in Dongguan.

With many workers in the Haijian International shoe factory in China complaining about excessive hours and seeking higher pay, that company is sending 1,000s of their jobs to Ethiopia. This as Huajian faces scrutiny from labor activists for how it treats workers. The activists’ focus points to changing labor conditions in China as manufacturers try to get more work out of an increasingly expensive labor pool.  But deep economic and demographic shifts mean a lot of low-end work — like making shoes — doesn’t offer huge profit in China.

Today, Chinese workers are less cheap and less willing. More young people are going to college and want office jobs. The blue-collar work force is aging. Long workdays in a factory no longer appeal to those older workers, even with the promise of overtime pay. Such tensions are fueling the drive of Huajian to move work to Ethiopia.

“In many respects, China’s economy is maturing,” writes The Wall Street Journal (June 1, 2017). The number of people who turn 18 each year and do not enroll in college — the group that might consider factory work — had plummeted to 10.5 million by 2015 from 18.5 million in 2000. Wages in Dongguan have increased ninefold since the late 1990s. Huajian peaked at 26,000 employees in China in 2006. Staffing is now down to 7,000-8,000 thanks to automation and the shift to Ethiopia. Citing labor costs and the country’s foreign investment push, Huajian is building a sprawling complex of factories on the southern outskirts of Ethiopia’s capital, Addis Ababa. Huajian’s shoe factories there already have 5,000 employees. When finished in 4 years, the Addis Ababa complex will be ringed by a replica of the Great Wall of China.

Classroom discussion questions:

  1. Why leave China?
  2. Why Ethiopia? Why not the US?
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