HR prices in China are about to go up – steeply – no matter what happens to the economy. If you are involved in the service industry in any way – and that would include all of us – then you are faced with the option of paying a lot more early or late. The only alternative is finding creative, out-of-the-box-thinking solutions – but we all know the chances of THAT working out.

The funny part is, this may all work out just great for you. Or someone like you.

New Millenium Math

Things in China have gotten expensive. Annoying for you – devastating for the masses on the lower rungs of the middle class. Anyone earning under 6,000 rmb a month is really feeling some pain right now, and that probably includes a lot of the people you have working for you – and plan on keeping.

If the Chinese economy gets sucked down into the global morass of sagging economies, then you are going to be swimming against a very cold, fast tide to cut costs and maintain profitability. You will need to cut those costs by firing people – or at least letting attrition work its dark magic. The few key people you have left will be shouldering more and more responsibility – and they are probably smart enough to figure out that they are being shafted. The guy in the office down the hall will gladly give their salary a heft bump to replace the pissed-off, overworked middle manager who just quit his shop for the same reasons.

If the Chinese economy avoids a slow-down then you’ll still be faced with broad-based salary hikes – but now in addition to paying more for those competent managers, you’ll also be bloating up your team with a lot of low-experience, high gross-pay employees under the new labor contract. And every one of them will need another piece of real-estate, a computer, software licenses (I may be goin’ out on a limb here, but you know what I mean), training, and lots of other costly extras. You will have a hell of a time making productivity climb as fast as your payroll does.

Dreams of Shanghai as a high-tech, high-concept outsourcing center seem to be wafting away on the hot breeze.