Epidemic Strains China’s Labor Market
Businesss low downs threaten an already weakened work force; quit or take less pay
A sharp economic slowdown in China caused by the corona virus epidemic is putting new pressure on the country’s labor market, as businesses struggling to maintain or revive operations resort to pay cut sand layoffs—or simply shut down. More job cuts could further depress consumer spending and weaken an economy that is projected to slow significantly or contract in the first quarter. Jim Huang, chief executive of China-America Commodity Data Analytics, a consulting firm, said he had no choice but to lay off 18 of his 20 employees in Wuhan after it became impossible to run his business in the hard-hit city because of government quarantine there. Many of his employees were in other parts of China when the lockdown started and couldn’t return, he said, making it difficult to serve clients and keep cash coming in. Mr. Huang, a U.S. citizen, said he is thinking of giving up as he waits out the epidemic in the U.S., where he is buying a farm. “I believe we have already entered into a recession” in China, he said. “If things get better, cool. If not, I’ll start a new chapter of my life here.” Other Chinese companies face similar problems. Uxin Ltd., an online used-car dealer withmorethan12, 000 employees, began furloughing staff at the beginning of March and paying reduced salaries meant to cover minimum living costs, citing “difficulty in operations,” according to a letter sent to some employees.
The company on Monday said it had taken a “series of measures to quickly adapt business for long-term growth,” including, with employees’ support, “enacting a temporary workload-based staffing program” to cut costs. A spokeswoman declined to comment further. Although companies are pushing to restart factories and ramp up business as fast as possible, quarantines and other government restrictions have made it hard to do so. As of late February, only 30% of China’s small and midsize companies had returned to normal operations, according to a survey by the Ministry of Industry and Information Technology. A survey of morethan8,000 firms by Chinese recruitment website Zhaopin in mid-February showed that nearly one third planned to cut jobs, while 46% said they might not be able to pay salaries on time. Many companies remained hopeful that hiring would snap back sharply once the outbreak is contained. Disruptions in China’s labor productivity and supply chain are expected to scale back foreign investment sharply during the first half of the year, but are unlikely to deter investors’
Steps that Chinese corporations have weighed during the corona virus outbreak
longer-term interest, some analysts say. Chinese officials have many tools to help stabilize the job market, including ordering local governments to offer unemployment subsidies and extending credit to stressed companies.
“Every effort must be made to prevent massive layoffs, and local governments must help keep employment stable,” Premier LiKeqiang said in February.
China’s urban unemployment rate crept up to 5.2% in Decemberfrom4.8%atthebeginning of last year. Many economists and scholars have long warned that official unemployment figures are likely to be understated; Chinese officials stand by their numbers. Even if the epidemic is controlled by the end of March, it could wipe out as many as five million jobs, said DanWang, an analyst at the Economist Intelligence Unit. Miniso, a fast-growing retailer back by Tencent Holdings Ltd. and private-equity firm Hill house Capital Management Inc., told staff in a letter Feb. 21 that while it didn’t intend to lay off workers as a humanitarian principle, it planned to slash the next paycheck-covering January’s.
wages— by 20% and by at least 30% for February and March. A former Miniso employee in Guangz hou said his manager told him he could quit and be paid in full for the first two months of the year or stay on staff and accept a forced salary cut and suspension in March. The27-year-old former employee said he was under great financial pressure, with an auto loan, 2,000 Yuan ($287) in monthly rent, and as much as 3,000 Yuan in monthly consumer loans. “My savings can only sustain for another two months. But looking for a new job hasn’t been easy. No companies are open for interviews at the moment.” A Miniso spokesman said the company revised its initial proposal and paid January salaries in full after receiving feedback from employees. The company had no intention to lay off staff but would “make proper adjustments” to salaries for February and March depending on workloads, he added.
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