Chinese Girl: Is that your real hair?

Me: Yes.

Chinese Girl: Oh…

Me: Do you like it?

Chinese Girl: *frowns* No… *points at Shanel* Her hair prettier than yours.

Shanel, Benito and I we’re confused and amused at the same time because of how random and unexpected the exchange was.

My hair has always been a source of curiosity to Chinese people. I never went back to that one hair salon that made me look like an idiot. I found a much better one instead. It was cheaper, cleaner, faster, friendlier and I got a head massage when they washed my hair, before and after the haircut. And, they didn’t charge me anything for a shave. There were no less than 25 women working there. They were the lowest rank of employees: they washed and massaged customers’ heads; brought tea towels and assisted the actual stylists. There were about 5 stylists. Then there were 2 people in charge of keeping the floor clean, and a receptionist who tendered the register. So a total of over 30 people worked there. That’s a lot.

Overall, I noticed that Chinese businesses are greatly overstaffed: hair salons, restaurants, museums -everywhere. I asked myself why and figured it’s because business owners don’t know how to allocate their resources efficiently. Indeed, instead of favoring specialization and re-thinking production method in order to increase productivity, it seems Chinese business owners prefer to throw labor at the production process, in order to meet quotas and/or production goals.

At first glance, it’s easy to criticize them because Econ 101 teaches us that that is not how one runs a business; one is suppose to utilize resources in order to maximize returns However passing such judgment on them is somewhat unfair because it is based on Western efficiency models. Chinese business owners are running their enterprises in an economic environment that is much different from ours.

Then it clicked: as of 2009, roughly half of China’s population (775 Million people) was a part of the workforce. Could you imagine making sure all those people have a job? It’s no wonder if the government has intervened to try and change mentalities regarding overstaffed business. The Chinese government wants to ensure there are enough jobs. While they are aware that the current methods of production are inefficient, they probably also realize that were they to favor specialization and Western methods of efficiency, a bigger portion of that workforce would be unemployed, which, could in turn to social unrest; something the Chinese government fears more than anything.