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Labour market inflexibility exacerbates skills shortage:

Hays Global Skills Index

The biggest challenge for China’s labour market is its relatively inflexible labour laws and large-scale outward migration of skilled workers. As a result, overall wages will rise and employers will have a more difficult time finding qualified workers.

Updated: 20 Jan 2016
The biggest challenge for China’s labour market is its relatively inflexible labour laws and large-scale outward migration of skilled workers. As a result, overall wages will rise and employers will have a more difficult time finding qualified workers.
This is one of the findings of a major report published by recruiting experts Hays in collaboration with Oxford Economics. The Hays Global Skills Index represents a unique and insightful barometer of the market dynamics and availability of professional skills in 27 key economies around the world, including China.
Overall, China rates 5.5 on the Hays Global Skills Index, compared to the average of 5.1. The Index creates a score for each country between 0 and 10 on the constraints and frictions being faced by its market for skilled labour. This is calculated through an analysis of seven components, covering areas such as education levels, labour market flexibility, and high-skill wage pressures.
A score above the mid-point of 5.0 suggests that employers are witnessing difficulties finding the key skills they need and are suffering market friction, whilst a score below 5.0 indicates a lax labour market in which there are no major constraints on the supply of skilled labour. Within these overall scores however, the scores attributed to each of the seven components can vary significantly, highlighting the different dynamics and pressures faced.
The Index shows that each country surveyed faces specific issues in its skilled labour force. 16 of the 27 countries are currently suffering some degree of labour market tightness, despite the global economic slowdown – an economic paradox.
The Index also shows China remains “extremely inflexible” compared to other Asian states such as Singapore and Hong Kong when it comes to their labour market.
“Labour market flexibility is especially important to head off skills shortages as openness to inward migration and relatively light labour regulations ensures employers can react swiftly to signs of stress in the labour market,” says Simon Lance, Regional Director of Hays in China.
“In Asia, although economic growth is fuelling wage inflation, relaxing labour market and immigration systems would go some way to alleviating this pressure.”
According to the report, the biggest education-driven contributions to skills development have been in the fast-growing Asian emerging markets such as China (see Chart 1 below).
 china-chart 1 
“Whilst the quality of the education system can vary across Asia, schools and universities in countries such as China have scope to expand their education performance and output to meet organisations’ demands for specific skills,” says Simon.
To combat the mismatch of skills availability and demand, Hays also recommends: the consideration of targeted immigration; fiscal incentives for employers to provide relevant training; and persuading young people to train in high demand areas.
“It would be beneficial if policy makers and the government were to relax the labour laws and tax regulations as it would encourage more inward migration,” says Simon.
“For employers dealing with the skills shortage we recommend they provide plenty of training and development opportunities for their staff as a retention strategy. They also need to be a bit more flexible in their requirements and focus more on transferable skills and cultural fit in order to find the right candidate.”
Meanwhile, China scores 6.4 on the fragility of the economy. Growth, while remaining high by US and European standards, has eased and is forecast to become moderate. Meanwhile, government finances and exports are forecast to weaken.
The health of the economy for China is at 4.9 on the Index. While fragility indicators point to increasing vulnerability and there are early indicators of economic weakening, inflation remains benign.
 china-chart 2  
To see the full Hays Global Skills Index and report, please go to
Hays, the world’s leading recruiting experts in qualified, professional and skilled people.
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About Hays
Hays is the leading global specialist recruiting group. It is the expert at recruiting qualified, professional and skilled people worldwide.
Hays Specialist Recruitment  (Shanghai) Co., Limited ("Hays China") operates across the public and private sector, dealing in permanent positions. Hays China’s eighteen specialisms span Accountancy & Finance, Banking, Architecture, Construction, Education, Engineering, Executive, Finance Technology, Human Resources, Hays Resource Management, Information Technology, Insurance, Life Sciences, Manufacturing & Operations, Oil & Gas, Property and Sales & Marketing.
Hays China operates four local offices in Shanghai, Beijing, Suzhou and Guangzhou. It is the local representative office for Hays plc, which is a global company with more than 7,800 staff operating from 245 offices across 33 countries.
Hays operates in the following countries: Australia, Austria, Belgium, Brazil, Canada, Colombia, Chile, China, the Czech Republic, Denmark, France, Germany, Hong Kong, Hungary, India, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Portugal, Russia, Singapore, Spain, Sweden, Switzerland, UAE, the UK and the USA.

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