WENZHOU, Zhejiang - Business owners in Wenzhou who have been reducing employee numbers as orders decline may face problems hiring more workers in the future due to a severe labor shortage.

"Because the average income for factory workers increased at least 20 percent in 2011 we had to cut their numbers following a decrease in orders since September," said Ke Zhongliang, the sales manager of Wenzhou Jinlishi Shoe Co Ltd.

Ke has seen nearly 30 percent of 2,000 original workers sent home as trade fell off and profits plunged.

Although he said he was prepared to hire temporary workers if a big order comes in, he added that it was difficult to find them.

"The trading business for 2012 will be very tough for us small and medium-sized enterprises (SMEs). We will to struggle to survive because there is no sign of recovery on the profit front or in the number of orders," said Ke.

Wenzhou Jingyi Clothes Co Ltd, launched two decades ago, is also struggling with falling profits and increasing labor and material costs.

"I've noticed the clothes export industry is suffering a downturn," said Liu Mengjue, the manager of Wenzhou Jingyi Clothes.

Being an original equipment manufacturer (OEM) of clothes like most local factories, Jingyi relies totally on the quantity exported overseas because the unit price of a single item is very low.

"Demand from overseas has dropped because the economic environment in the US and Western countries is getting worse with fewer people buying new clothes in the market," said Liu.

In 2003 the factory employed about 1,000 employees. The size and scale of the family enterprise has been squeezed so much that it now has just 500 staff. "We had to cut the number of employees nearly every two years because we could not afford the reduction in profit, which we try to maintain at 10 percent as the annual target," said Liu.

Liu also realized that more workers were changing jobs frequently, either for higher salaries or for more famous brands in the industry.

"Only 60 percent of our current employees have been in the factory for longer than half a year and many others quit their jobs within two to three months," he said.

To keep enough workers in the factory for the peak production period toward the end of the year, Liu was forced to send certain orders to be manufactured in smaller factories or privately owned workshops, which reduced his profits even more.

Many migrant workers would prefer a stable job but feel compelled to move on out of necessity.

"I cannot stay in a single factory too long because most of the small and medium-sized factories in the region are struggling with financial problems. I am not sure whether it will shut down all of a sudden," said Jiang Hui, a 24-year-old migrant worker from Anhui province. He has changed his job twice in the past three months in the city.

Jiang is looking for a job at a bigger factory in the city. He is paid 4,000 yuan ($634) a month at a shoe factory at the moment.

"We've noticed the complaints from some companies that they were forced to cut the number of workers but they also have problems retaining staff," said Zheng Chen'ai, chairman of the Wenzhou Chamber of Clothing Commerce.

Zheng added that it is better for business owners to look after their current workers and not cut staffing levels to maintain a stable atmosphere.

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