Around the world no industry segment, save perhaps semiconductors, has experienced more disruption than human capital/contingent labor in the manufacturing sector. Overall global staffing industry revenue has recovered from its 2020 lows but remains volatile. Much depends on how quickly the world manages Covid-19 (i.e., Delta and Omicron variants), or if further regional waves continue. Countries such as China, the US, France, Italy, Germany, and Australia were expected to decline even more, while ironically India was forecast to increase by 11%. According to the World Economic Forum, the age group between 18 and 24 has been most affected. This is also the primary demographic group for light industrial manufacturing contingent labor jobs. Continuous changes in local government regulations, while dealing with the pandemic, have made recruiting and hiring for these roles extremely challenging across the world. 

Covid is not the only reason why attracting contingent workers is becoming an increasing challenge. Wages are relatively stagnant, and the workforce is becoming better educated with higher skill sets and expected higher salaries. Contingent staffing constitutes 90 percent ($438 billion USD) of the global staffing revenue and the pandemic has affected the manufacturing sector more than the services sector. (Source: https://www.beroeinc.com/blog/global-temporary-labor-market-to-recover-only-partially-in-2021/

Workers across Asia are engaging in up-skilling and re-training in record numbers.

• According to a study from Seek Asia, Boston Consulting Group, and The Network, the majority, or 72%, of workers in Asia are willing to retrain for new jobs in any case as they look towards the aftermath of the pandemic. Furthermore, another 25% said that they are willing to retrain should the need arise.
• Of the 72% of respondents who are willing to retrain in any case, most of them work in the manual work & manufacturing (76%); digitalization & automation (76%); and customer service (76%) industries.
• Those aged between 21 and 50 are the most likely to retrain, and IT & technology (27%), digitalization & automation (25%) and administration & secretarial (19%) roles appeal most to them.
• The study also found that automation is perceived as a threat to job security for many workers. Nearly half, or 49% of workers in Asia have become more concerned about automation during the pandemic. Worldwide, four of the top five countries where workers are concerned about being replaced by technology are Asian countries. This includes Singapore, Malaysia, the Philippines, and Thailand.
• According to the study, in the past year, workers have been taking steps to upgrade their skills. Over a third of workers in Asia, or 34%, said that they have spent significant time (few months per year or more) learning while 29% said they have spent a few weeks a year doing so. On-the-job training (74%), self-study (57%) and online educational institutions (46%) are the top three most popular resources they used to train and develop new skills.

China:

• In 2020 the average hourly worker in China saw a 6.1% increase year over year. However, in manufacturing jobs, the increase averaged a 5.9%, down from an 8.4% increase from 2019 to 2020 (annual earnings for a manufacturing role across all provinces was 82,783 Yuan. (Source: National Bureau of Statistics of China).
• From January through August 2021, 13 of China's provinces and cities have raised their minimum wage for hourly workers an average of 11.3%, after only 3 provinces increased in all of 2020. In one of the most strategic economic development provinces, Guangdong, average hourly and monthly wages have recently risen as much as 9.52% in 2021.
•     (Source: https://www.sgsgroup.com.cn/en/news/2021/09/china-minimum-wage-updates-from-jan-to-sep-2021).
• In November 2021, China's Purchasing Manager Index climbed over to 50%, up from 49% in October, reflecting more optimism in the industry; The Employment Sub-Index of the PMI increased 0.1% in November 2021, indicating that the employment climate for manufacturing firms may be improving a bit, but still on the lower side of 50% of those enterprises surveyed. (Source: Department of Service Statistics of NBS; China Federation of Logistics and Purchasing(CFLP).
• The available number of younger workers is shrinking. At present, there is no longer a large difference in wages from mainland China and developed/urban cities for direct labor. As a result, contingent workers are staying closer to home to be with family, while earning close to the same wages.
• The workforce is becoming more accustomed to improvements in their work environment, preferring the freedom to work remotely, with more flexibility and not tied to a shop floor.
• Competition for factory/manufacturing workers is also very cyclical and subject to increased competition from large e-commerce giants.
• During Chinese New Year, direct labor workers tend to vacate the cities to go home, further impacting the ability to continue efficient production.
• Employers are increasing benefits provided to attract and retain the contingent workers. Providing medical care, educational/training opportunities, preferred work shifts/hours, and caring environments are critical.
• Staffing firms are expanding their recruiting and networking capabilities. They are reaching further regions to include more inland migrant workers, lower income areas, and schools. 

SOUTH ASIA

Covid-19 has significantly changed the landscape of the contingent labor supply market in South Asia, particularly in those countries that heavily rely on foreign workers like Malaysia and Singapore. 

Vietnam:

• Covid was initially well controlled, as Vietnam recorded growth of 2.9% GDP in 2020. The first half of 2021 was rising about 6.6% until Q3 when the Delta variant led to severe lockdowns, causing a retraction of 6.17% y/y. A severe shortage of hourly workers emerged as migrant workers returned to their hometowns, prolonging factory closures. (Source: https://ihsmarkit.com/research-analysis/vietnam-economy-rebounds-after-third-quarter-gdp-contraction-nov21.html)
• Average monthly wages for workers fell in Q3 2021 y/y by 17% (average $226 USD down from $264 USD), further challenging the local labor market; In response the government has provided some incentives for manufacturing firms by supporting some allowances and payments and reducing items such as compulsory insurance by 0.5-1% for multi-national companies. (Source: General Statistics Office, Government of Vietnam)
• Q4 2021 started to bring back some normalcy, however an uptick in average covid cases in early December is causing concern. There is the expectation that Q1 2022 will bring even more staffing challenges as Chinese New Year holidays further reduce the available workforce. 

Malaysia:

• Summer into fall 2021 was a rough time in Malaysia due to Covid spikes, escalating to an average of 21,000 cases per day. Fortunately, the average dropped to about 4,800 per day in mid-December. As a result, on December 10, the Ministry of Human Resource and Manpower Malaysia made an official announcement to re-establish the application process to allow foreign labor from neighboring countries such as Indonesia, Myanmar, Vietnam, Nepal and Bangladesh for all sectors and industries.  This was the first time since early 2020 when they prohibited new foreign workers and quota applications. 
• This development should enable the labor market to gain momentum into Q1 2022, especially for Electronics and Manufacturing MNCs where in the past 2 years there was intense competition to recruit local workers due to insufficient supply and higher costs. 
• The local workforce is traditionally unstable primarily due to the availability of other options for blue-collar workers. The competition among the multi-national corporations is fierce to hire local workers. This is putting pressure on the providers of permanent direct labor and raising recruiting costs significantly. The proliferation of e-commerce industries has put further pressure on manufacturing labor as many have moved to delivery-related roles. Recent hourly rates have risen 15-20% for both morning and night shift light industrial work; future increases of about 10% may be observed in certain states.
• Most companies are now looking at all 3 direct labor models in combination to maximize their chances for success- local workers on hourly rate, Outsource (monthly salary, no conversion terms), and headhunt direct hiring. In addition, maintaining and supporting the foreign workers already in-country is of paramount importance. Additional perks like free Wi-Fi, free Covid testing, and enhanced dorm/kitchen amenities have been offered. 
   

Singapore

• Singapore is traditionally built on foreign talent and the blue-collar workforce is comprised of almost 100% foreign workers from Malaysia, China, or Taiwan. Headhunt direct hiring per headcount ranges from about S$ 1200 to S$ 1800. As recent daily average covid cases have fallen in these countries, the available supply of workers should improve into Q1 2022 after the Chinese New Year holidays end. Demand in manufacturing for foreign workers is continuing to increase.
• Singapore government imposed very stringent “Stay-home Notice“ of 14 days to 21 days quarantine for workers from Malaysia and Taiwan and companies have incurred an approximate S$ 2400 per headcount expense to the government for Taiwanese workers to cover additional Stay-home Notice expenses.

India:

• After a disastrous May 2021, when daily Covid cases averaged 369k, India has dropped the daily average in mid-December to about 7,500. The monthly average salary of manufacturing workers remains stable at INR 12,558 ($166 USD);  for semi-skilled: INR13,934 ($184 USD); and for skilled: INR15,232 ($201 USD) exclusive of overtime. The expected peak season shortages in March/April, and in June due to school examinations and graduations should be the main challenges in maintaining a good supply, outside of any unexpected additional covid spikes.
• Strategies to attract and retain contingent workers, while keeping them safe are evolving. Primary focus on attracting the workers is around agency service fees. These are increasing but procurement tenders have shown an ability to mitigate some cost increases.
• Companies with expiring contingent labor agreements may do well to try and negotiate one-year renewals at the same terms and rates currently in effect as trying to move the business to new suppliers, if that is even possible now, may prove too disruptive to business.

APAC Pricing Situation

• Overall government mandated minimum wages have remained stagnant region wide with a few exceptions. (Malaysia recently increased hourly wage to MYR1300 from MYR 1200 to attract more workers).
• Total integrated costs of hiring/contingent labor however have increased due to additional welfare provided such as food subsidies, allowance for not going out dormitory, free Wi-Fi, social distancing in dormitories (fewer people per room increasing number of rooms needed) and transportation, additional deep sanitization, Covid testing, and more.
• Companies are running local tenders and suppliers are bidding on different scenarios to provide outsource labor (monthly pay, no conversion), dispatch (hourly pay with ability to negotiate conversion to full-time fees).
  • Focus is on reducing the management fees charged by suppliers, along with outsourcing transportation, meal services, and ‘extras’ like free Wi-Fi, kitchens, recreation/private prayer space and more.
  • Other variable cost saving opportunities around shift differentials, night shift work, health exam fees, etc.).
• RFPs conducted during the Covid crisis have largely sought to remain cost neutral, but in some cases small reductions of 3-5% can be obtained by focusing on lowering management fees in return for more volume and longer-term contracts.
• Given the changing dynamics of the labor markets in most APAC countries, at a minimum semi-annual RFQs are recommended to benchmark the costs associated with contingent labor, where possible.