Non-Wage Benefits to Reduce the Labor Turnover in Swedish MNCs in China

Abstract: Due to a deficit supply and excess demand of skilled labor in the Chinese labor market, Swedish MNCs have faced difficulties in attracting and retaining skilled labor. This study aims to investigate whether the provision of different types of non-wage benefits can reduce labor turnover in Swedish MNCs in China. By collecting and analyzing primary data from 107 facilities in Swedish subsidiaries in China, mainly in the manufacturing industry, we find that non-wage benefits in general helps to reduce labor turnover rates. Social benefits and in particular medical insurance have a significant negative effect on labor turnover. These effects are most significant for large employers. We argue that the high labor turnover in China is due to a structural shortage of skilled labor, caused by a large divide in social welfare and education between urban and rural labor, and that the most effective strategy response for MNCs in China is to be actively engaged in innovating the local institutions in order to accelerate reforms of the Chinese welfare and education system. This study contributes to the scarce research regarding the relationship between non-wage benefits and labor turnover in the Chinese context.