In pursuit of cheap labor

Cheming Yang
The classic economic resources include land, labor and capital. Economic resources are the goods or services available to individuals and businesses used for production. These economic resources are also called the factors of production.
What constitutes the fourth factor is s bit tricky. Many economists identify a fourth factor of production: entrepreneurship. More recently, technology is also proposed to be a fourth factor by many. The number of production factors is never limited to four. It is fair to say we can have five factors of production.
Without doubt, all these five factors are equally important in that the lack of any one of the five will hurt production. Entrepreneurship is the brain of these production factors. Many hard choices are made by the brain. A recent phenomenon begets the question whether an entrepreneur should go after cheap labor or advance technology if he or she has to choose one.
The anti-Chinese demonstration in May might have left many Taiwanese entrepreneurs scratch their heads pondering this question. Vietnamese protesters set fire to 16 Taiwan-owned factories, and at least 500 Taiwanese-owned plants were damaged, according to an estimate by the Council of Taiwanese Chambers of Commerce in Vietnam.
Many Taiwanese entrepreneurs left Taiwan in pursuit of cheap labor in the last decade of 20th century. That is also one of the important reasons why Taiwanese investors come to Vietnam in the first place. Cheap labor is highly coveted for labor intensive industries. However, the pursuit of cheap labor has negative implication. Since the goal is chasing after cheap labor, the goal implies the inherent tension between the laborers and the investors in that there is a natural tendency to suppress the wages and welfare of the employees in order to keep the labor inexpensive as long as possible. So for the entrepreneurs pursuing cheap labor, it is hard to get rid of the stereotype images of oppressors although they might be welcomed as saviors as they first arrive. That is exactly the situation Taiwanese investors are facing in Vietnam.
Unless the entrepreneurs can rely less on labor, they cannot get away from the fate of a nomadic life in pursuit of cheap labor. What is the alternative? Making their businesses more technology intensive seems to be the only way out of this conundrum. Labor is still an indispensible production factor. But there is a big difference between relying on low-tech laborers and on high-tech laborers.


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