The Era of Ultracheap Stuff Is Under Threat

The workplace features floor-to-ceiling windows and a cafe serving matcha tea, as well as free yoga and dance classes. Every month, workers gather at team-building sessions to drink beer, drive go-karts and go bowling.

This isn’t Google. It’s a garment factory in Vietnam. 

Asia, the world’s factory floor and the source of much of the stuff Americans buy, is running into a big problem: Its young people, by and large, don’t want to work in factories. 

That’s why the garment factory is trying to make its manufacturing floor more enticing, and why alarm bells are ringing at Western companies that rely on the region’s inexpensive labor to churn out affordable consumer goods. 

The twilight of ultracheap Asian factory labor is emerging as the latest test of the globalized manufacturing model, which over the past three decades has delivered a vast array of inexpensively produced goods to consumers around the world. Americans accustomed to bargain-rate fashion and flat-screen TVs might soon be reckoning with higher prices.

“There’s nowhere left on the planet that’s going to be able to give you what you want,” said Paul Norriss, the British co-founder of the Vietnam garment factory, UnAvailable, based in Ho Chi Minh City. “People are going to have to change their consumer habits, and so are brands.”

Workers in their 20s—the garment industry’s traditional labor force—routinely drop out of his company’s training program, Norriss said. Those who stay often work for just a couple of years. Norriss hopes that dialing up the workplace cool quotient might make a difference.

“Everybody wants to be an Instagrammer or a photographer or a stylist or work at a coffee shop,” he said.

In response to the crisis, Asian factories have had to increase wages and adopt sometimes costly strategies to retain workers, from improving cafeteria fare to building kindergartens for workers’ children. 

Toy and game maker Hasbro said this year that labor shortages in Vietnam and China had pushed up costs. Barbie-maker Mattel,

“For U.S. consumers that have been used to having goods at a certain and relatively stable part of their disposable income, I think that foundation is going to have to be rejiggered,” said Manoj Pradhan, a London-based economist and co-author of “The Great Demographic Reversal.”

Starting in the 1990s, China and then other Asian manufacturing hubs integrated into the global economy, turning nations of poor farmers into manufacturing powerhouses. Durable goods such as refrigerators and sofas became less expensive. 

Now those manufacturing nations are running up against a generational problem. Younger workers, better-educated than their parents and veterans of Instagram, TikTok and other social media, are deciding their work lives shouldn’t unfold inside factory walls.

Demographic shifts are playing a role. Young people in Asia are having fewer children than their parents did, and at later ages, which means they are under less pressure to earn a steady income in their 20s. A booming services sector offers the option of less-grueling work as store clerks in malls and receptionists at hotels.

The problem is acute in China, where urban youth unemployment hit 21% in June even though factories had labor shortages. Multinational companies have been moving production from China to nations including Malaysia, Indonesia, Vietnam and India. Factory owners there said they, too, are struggling to get young people to sign up.

Factory wages in Vietnam have more than doubled since 2011, to $320 a month—three times the rate of increase in the U.S., according to data from the United Nations International Labor Organization. In China, factory wages rose 122% from 2012 to 2021, the latest period for which the U.N. data is available. 

Earlier this year, Nguyen Anh Tuan, a 25-year-old Vietnamese high-school graduate, quit his job as a mechanic at a suburban Hanoi car-parts factory to work as a motorbike driver for Grab, the local

“My supervisors often made very unpleasant remarks, which stressed me out,” Tuan said of his three years at the factory. Factory work would tempt him again only if his old monthly salary of $400 doubled, he said.

In the past, manufacturers might simply have moved to less expensive destinations. That’s not so easy these days. There are nations in Africa and South Asia with large labor pools, but many are politically unstable, or lack good infrastructure and trained workforces.

Clothing brands were stung when they expanded into Myanmar and Ethiopia, only to find operations disrupted by unrest and civil war. Bangladesh has been a reliable base for producing clothes, but restrictive trade policies and clogged ports have kept it from making much beyond that.

India has a huge population, and firms seeking alternatives to China are expanding there. But even in India, factory managers are beginning to complain about the difficulties of retaining young workers. Many young people prefer farm life supported by state welfare programs or choose gig work in cities over living in factory dormitories in industrial hubs. Trained engineers leave factories for IT jobs.  

Asian factory owners are trying to make the jobs more appealing, including subsidizing kindergartens and funding technical-training programs. Some are moving factories to rural areas where people are more willing to do manual labor, but that puts them farther away from ports and suppliers and forces them to accommodate rural life, including worker absences during harvest. 

Christina Chen, the Taiwanese owner of a furniture maker that sells to American retailers such as Lowe’s, decided to move her factory out of southern China four years ago, hoping it would be easier to recruit. She first considered industrial zones near Ho Chi Minh City, but she heard nightmarish stories about high worker turnover and soaring wages.  

She set up instead in rural northern Vietnam. Her floor workers are typically in their 40s and 50s, and some can’t read well, she said, which requires explaining tasks verbally and using visual demonstrations. But her workforce is more stable, she said.

She treasures her younger employees who can read. She involves them in decision-making, invites them to meet her American buyers when they visit, and shares pictures with them of the company’s tables and chairs in U.S. stores.

Her company, Acacia Woodcraft Vietnam, is partially automated, she said, but human craftsmanship is still necessary for many tasks. 

The labor landscape was much different two decades ago, when finding workers was as simple as opening factory gates and watching bicycles stream in. 

In 2001, Nike reported that more than 80% of its factory workers were in Asia, and that the typical one was 22, single and raised on a farm. Today, Nike’s average worker in China is 40, and in Vietnam, 31, in part because Asian countries are aging rapidly.

Maxport Limited Vietnam, a Nike supplier founded in 1995, has seen competition for workers intensify. Sunlight now beams through windows at its factories, and it has planted thousands of plants and trees. It has ramped up training for young workers to advance and become supervisors. 

Still, it is struggling to attract young people. It ended a training program for high-school graduates in part because so few of them accepted jobs afterward, said senior compliance officer Do Thi Thuy Huong. Around 90% of Maxport’s workers are 30 or older.

Lovesac, a furniture maker based in Stamford, Conn., says its workforce in China is aging, and it has become harder to find younger workers to fill openings.

Its chief executive, Shawn Nelson, said young people in places like China and Vietnam who have smartphones and are plugged into global culture are less interested in factory work. “Once they can see the Kardashians, they don’t want to do that work anymore,” he said. “They’d rather work in a shop.” 

The company is planning to move some operations to the U.S. Later this year, it intends to start making seats at an automated factory in North Carolina.

When Asian factories automate, many have trouble finding workers capable of operating advanced machinery. Managers said not enough young people are interested in learning mechanical engineering, and that the ones that do jump to other professions.

Abhyuday Jindal, managing director of Indian stainless-steel manufacturer Jindal Stainless, said Gen Z workers are drawn to the IT sector, and that most of them “look for office jobs, even when recruited for technical functions.”

Factories “either have to pay a bit more money for the skills they want, or compromise on the capabilities that they need,” said Richard Jackson, managing director of JacksonGrant, a Thailand-based recruitment firm.

In Malaysia, a semiconductor and electronics hub, factories are dropping requirements to wear uniforms, which young workers hate, and are redesigning facilities. 

“We are trying to make our factories a little bit more sexy, open up the partitions, give it more glass structure, give it more light, give it some nice music, create a kind of Apple environment,” said Syed Hussain Syed Husman, president of the Malaysian Employers Federation, which represents producers.

Young people from developing countries who otherwise might take factory jobs are finding work caring for the growing numbers of the elderly people in developed nations, as well as plugging gaps in those countries’ aging workforces.

Susi Susanti, a 29-year-old from Indonesia, said she tried factory jobs after graduating from high school. She hated being pressured to work faster by her managers at an electronics factory, and in a second job making shoes. She told her mother she had to do something else.

A six-month training course taught her rudimentary Mandarin, and she set off to work caring for an elderly couple in Taiwan. Her pay is three times as high as she earned in factories back home, she said, and it’s less exhausting. “When the person I’m looking after is doing well,” she said, “I can relax.”

Write to Jon Emont at [email protected]