The turning point in Lewis’s theory—when surplus labor shifts to a labor shortage—occurs as rural workers gradually move from agriculture to non-agricultural sectors, reducing the pool of available labor until it is nearly exhausted. This concept, introduced by Nobel Prize-winning economist Arthur Lewis, highlights the critical moment when an economy transitions from having an abundance of labor to facing a scarcity. In the context of industrialization, this shift has become increasingly evident in places like Dongguan, where the once-abundant migrant workforce is now shrinking.
On February 16, the Dongguan model faced a red light. After a rainstorm, the city was shrouded in thick mist, and the streets were eerily quiet. It was the Lantern Festival, yet the manufacturing towns remained deserted. Canteens and fast food shops near factories stood empty, and the streets had few pedestrians. The contrast between recruiters’ enthusiasm and workers’ indifference painted a clear picture of the current situation.
After spending days visiting various townships in Dongguan, it became apparent that the labor shortage was no longer a distant concern. At Luming Road in Qingxi Town, near the Hardware Factory, job advertisements were posted everywhere, but very few people showed interest. Even those who inquired often left without taking any further action.
Once a major hub for migrant labor, Dongguan saw its workforce shrink year by year. Official data from 2007 listed 12 million migrant workers, marking what many considered the peak. Since then, no official figures have been released, hinting at a significant decline. Many executives and labor market experts agree that the Lewis turning point has already taken effect in China, but OEM companies have little choice but to adapt.
Wages have become the central issue in the labor shortage. At the Zhitong Talent Market in Dongguan, a young man from Hunan said, “No one wants to work for less than 2,000 yuan a month.†Meanwhile, factory owner He Jianchen expressed frustration: “Wages keep rising, workers are not satisfied, and companies are struggling under the weight.â€
Over 10,000 small and medium-sized enterprises in Dongguan are caught in this dilemma, leading to a sharp slowdown in economic growth. At the factory gates on Luming Road, recruitment ads show wage increases over the years—from 770 to 920, and even up to 1,100 yuan. These numbers reflect the ongoing struggle to attract workers.
Since 2005, Dongguan has raised the minimum wage five times, with the rate of increase accelerating each time. While some companies promise higher wages, such as 1,150 or even 1,500–1,800 yuan per month, many workers remain skeptical. As Liu explained, “Most of these high wages don’t actually translate into real pay after deductions for accommodation and meals.â€
At the Zhitong Talent Market, a worker pointed to an advertisement from the Baima Rongke Electronics Factory, which claimed an average monthly income of 2,000 yuan. But he noted that this required long hours of overtime, and basic expenses weren’t included. Despite this, the factory was considered mid-range in terms of treatment.
In recent years, while minimum wages have risen, workers' real incomes haven’t kept pace. Some factories have increased overtime hours, and others have reduced meal subsidies. Cai Xiaomei, a senior manager at the Zhitong Talent Market, said, “Wages are largely determined by the market, and the minimum wage is just a baseline. The benefits of wage increases usually go to management and technology, not ordinary workers.â€
Dongguan’s six-year minimum wage period saw only minor increases, with a notable gap in 2007 and no raise in 2009. Private business owners resisted wage hikes, and during the 2009 economic downturn, the government suspended raises due to poor business conditions.
As labor costs continue to rise, many factory owners are becoming increasingly pessimistic. He Jianchen, owner of a clothing factory, said, “Wages will definitely rise, and we expect a 10% increase. If we do, we can keep our workers from leaving.†However, such increases are putting pressure on his business, making him consider other options.
While conditions vary, most small and medium-sized factories in Dongguan face similar challenges. At the Zhitong Talent Market, nearly every job posting offered similar wages, with workers constantly comparing offers. For many, an extra 300 yuan a month could mean a deposit back home.
Despite this, many factories find it difficult to afford these increases. Sun Yu, a partner at a national consulting firm, said, “Factory profits are already low, and rising labor costs will only make things worse. Most foundry companies can’t afford to significantly increase wages.â€
Liu, who was looking for a better job, wanted a salary of at least 2,000 yuan with minimal overtime. This is a common requirement among migrant workers. Xue Litong, who has lived in Dongguan for over a decade, noted that fewer people are coming to the city. Older workers prefer to return home, while younger ones seek better opportunities in Jiangsu and Zhejiang.
According to the latest data, Dongguan sent 3.5 million passengers during the Spring Festival, but only 1.6 million returned 11 days later. Migrant workers are leaving in large numbers, creating a serious challenge for the local economy.
At the Zhitong Talent Market, the usual buzz of job seekers was absent. Recruitment tables were empty, and job postings were left unattended. A recruiter said, “There aren’t many people here. It’s not worth waiting anymore.â€
This was the third job fair after the festival, and the labor market had gone quiet. Some companies even started approaching candidates directly, saying, “Come sit down and talk.â€
Cai Xiaomei believes the employment turning point began during the 2008–2009 financial crisis. “The number of foreign workers has dropped significantly,†she said. While the crisis accelerated the trend, the labor shortage had already begun before 2005.
Dongguan’s labor shortage coincided with a slowdown in GDP growth. The more severe the shortage, the faster the growth decelerated. After reform and opening up, Dongguan maintained a GDP growth rate of nearly 20%. But since 2005, the growth rate has slowed, reaching its lowest point in over two decades in 2007.
By 2009, the government set a target of 10%, but actual growth was only 5.3%. Last year, it rose to 10.3%, but the target for this year is 8.5%. The economic development of Dongguan and the number of migrant workers are closely linked. With fewer workers, public facilities and services built for a larger population may now be underutilized.
With the departure of workers, factories are struggling. Many bosses are under severe pressure, and the momentum of their businesses is slowing. Some are turning to real estate or moving their factories out of Dongguan.
According to recent statistics, the number of Hong Kong and Taiwan companies in Dongguan has decreased by 5,000 in the past two years. Many factories have also gone vacant, signaling a deepening crisis.
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