Severe labor shortages in the manufacturing powerhouses of eastern China are forcing managements to boost wages and other incentives to attract and retain staff.

Fu Erjian, a job center worker in Dongguan, a major manufacturing city in Guangdong Province, said 90 percent of local companies are having difficulties recruiting workers. Hardest hit are electronics, shoes, clothing and toy manufacturers. On average firms in these sectors are 20 percent understaffed, Fu said.

According to Fu, at a job fair held in his district in late February, 167 companies advertised 2,470 vacancies, but attracted only 700 applicants. Some employers were offering rewards to people who could introduce workers, Fu said.

It is not just Dongguan. All across the Pearl River Delta manufacturing zone, employers are facing the same problem. Some factories began work a week earlier than usual after Chinese New Year in order to fulfill orders with a reduced workforce. Farther afield, the Yangtze River Delta and Shandong Province are experiencing the same problems. One Shandong factory had to turn away orders because of the labor shortage.

Employers and local authorities are taking measures to attract workers. Guangdong-based BBK, an electric appliance company, is raising its monthly wage from 770 yuan (US$113) to 1,000 yuan (US$146). The Shenzhen Human Resources and Social Security Bureau have said they plan to raise the city's legal minimum wage. In Wenzhou, Zhejiang Province, the average monthly wage has risen to 1,400 yuan (about US$205), up 200 yuan over last year.

Employers are also improving their human resources management. In Dongguan, firms are introducing bonus schemes and career development plans to attract staff.

In early 2009, when the global financial crisis hit China, manufacturers slashed jobs across the board as exports plummeted. But the Chinese economy recovered rapidly and the problem of labor shortages surfaced as early as the second half of 2009. It has worsened as the economy continues to accelerate.

Experts say the underlying reason is that China's economic structure has changed. Tan Bingcai, of Guangzhou's Development Research Center believes the era of cheap labor is over. Low wages, especially in high-productivity industries, can no longer attract migrant workers. This is the root cause of the current labor shortage, he said.

Furthermore, manufacturers are relocating inland from coastal regions. Many Guangdong firms are moving to Jiangxi Province.

And eastern areas have lost their advantage in terms of pay. Statistics show that in the third quarter of 2009, migrant workers could earn 1,455 yuan (US$213) per month on average in the east, 1,389 yuan (US$203) in central regions, and 1,382 yuan (US$202) in the west.

This means that, after taking into account travel expenses and the higher cost of living in the east, it no longer makes sense for workers to move east to find a job.

In addition, migrant workers are setting their sights higher. "Nowadays only employers who offer good salaries and working conditions can attract workers," said Zhang Quanru, a veteran professional in the contract labor business.