Labor force 'at turning point' (2)

"This means that there’s no excess labor force in the countryside," he said. "Although there is room to improve productivity in agriculture, there’s no possibility to transfer a large proportion of the labor force from rural areas to cities because we did it in the past."

Businesses, particularly manufacturers in coastal areas, have already felt the pinch of labor shortage.

This, Cai acknowledged, is another consequence of the end of China’s demographic dividend — the drying up of cheap labor.

He said he believes the country reached the "Lewis turning point" in 2004 — the point when a country’s excess labor is fully absorbed and further capital accumulation means a subsequent increase in wages.

The average wage increase was 14.3 percent among workers in the public sector and 18.3 percent among those in the private sector last year, according to the National Bureau of Statistics.

"The salaries of migrant workers have grown by at least 10 percent every year for the past decade, and the shortfall in labor will result in more wage increases in the coming years," Cai said.

Zeng Hongwu, general manager of Apples Industrial Co, which makes leather goods in Guangzhou, said his company has been struggling to recruit employees since 2009, despite the fact he has raised the monthly wage from 2,000 yuan to 2,600 yuan ($320 to $416).

"Although we have more than 600 workers, we’re still short by about 30 percent," he said.

To offset the problem, Zeng said his company began outsourcing orders to other companies in the city, and is contemplating sending orders further inland, "to Jiangxi, Hunan and Sichuan provinces, where labor is cheaper’’.

Cai urged authorities to ensure salaries sustain growth by raising the minimum wage and stepping up guideline policies, while trade unions should extend collective bargaining to more enterprises.