Labor costs going up around the world

This time its in China. As the global demand for human capital continues to out-pace the supply, the Chinese labor market is experiencing some pretty rapid increases in labor costs.

For our global customers, China has always had the benefit of a relatively low labor cost… but that could soon change. In two separate articles that I wrote (Ontario minimum wage increases and Labor costs forecasted to continue rising), I talked about the impending minimum wage increases taking place across North America.

Well, the Wall Street Journal today reported that McDonald’s is increasing wages in China by as much as 56% over the Chinese minimum wage (subscription required to access the full article). This translates to an average 30% increase across their 45,000 employees in China. Surely it doesn’t take much to realize that all other businesses that target the same labor pool will have to match McDonald’s or lose their people.

But where is this 30% increase in labor cost going to come from? From the bottom line of course. Which is why a workforce management solution becomes even more important. As the demands on labor continue to rise, so to do its costs. And with little wiggle room to increase retail prices, businesses have no choice but to become better at managing their labor spend.

Many of the world’s smartest organizations understand that even a seemingly small savings of 2% or 3% of their total labor spend translates to a significant positive impact on the bottom line. For public companies, that could be the difference of making their numbers, or missing them by a penny or two. And we all know how much that can hurt on stock performance and shareholder value :-)