Zhejiang Kang'er Lok Electronics Company, a manufacturer of small switches in eastern China's Zhejiang Province, has been operating at half capacity since February.

"Labor recruitment has been a big headache," said Ke Zhiwu, general manager of the production department of the company, which boasts annual sales of 10 million yuan (about $1.53 million).

"The company should employ about 350 workers, but we've only managed to hire 150 this year, even after salaries were raised."

Ke's complaint seemed contradictory with the scene at a local job market in Liushi Town, Leqing City, where the switch producer is located: About 30 young and middle-aged job hunters were sitting in a lobby waiting for jobs.

In total, more than 400 people in the town were seeking employment.

The situation is the same in other eastern coastal regions: Employers are struggling to find staff while unemployed workers can't find jobs that meet their salary expectations.

"I can't understand why so many jobless people are just wandering around looking for jobs. They don't seem eager to actually get one," said Wu Zujun, deputy head of the employment service bureau of Yiwu City, another manufacturing base in Zhejiang.

While owners of manufacturing companies are complaining about a labor drought in Yiwu, there have been over 300 people, 500 sometimes, seeking jobs in the market each day since February, said Wu.

"We have 5,000 to 6,000 job opportunities every day. I believe it wouldn't be so difficult if the job hunters really wanted to work," Wu said.

Vocational training needed

Som analysts deny there is a "labor famine" in China, pointing to high inflation as the major culprit for the apparent shortage.

The increase in China's consumer prices accelerated to a three-year high of 6.4 percent in June, as a result of soaring food and property prices, according to the National Bureau of Statistics.

The situation is caused by job seekers' high salary expectations and firms hit with soaring labor and raw material costs, as well as the rising renminbi and lackluster market, economists say.

"I'm still looking for a job, not because there are no opportunities. Salary is the problem," said 32-year-old Fang Houliang from southwestern Chongqing Municipality while at a job fair in Liushi Township.

With a salary of about 2,000 yuan per month, Fang was hunting for a higher-paid job.

"Of the 2,000 yuan, 300 yuan goes to rent and electricity fees, 1,200 yuan for feeding a family of three, and then there's the cost of cigarettes and phone calls, little is left to save," Fang said.

"The pay should be at least 3,000 yuan a month, considering the price hikes of daily necessities," he said.

Other job hunters have made similar comments at job fairs in Wenzhou, Yiwu and other cities in Zhejiang. Many job hunters told Xinhua they had been waiting for the right jobs for up to two months.

Wang Fuman, a migrant worker from southwestern Guizhou Province, said, "We are paid by the number of products we make, so we clearly know the costs and profits, and we deserve higher pay."

"The problem is pay," said Ni Mengxuan, general manger of Zhejiang Nanfang Gift Company.

"Five years ago, migrant workers needed "guanxi" (recommendations by relatives or friends) to get recruited." However, an average income of 2,500 yuan per month now is unable to attract enough workers.

The person in charge of a precise hardware factory located in Dongguan City of southern Guangdong Province, who preferred to remain anonymous, said that he had kept raising salaries over the past two years to maintain sound operations.

"For an output of every 1 million yuan, we used to spend 80,000 yuan on labor. The figure has now jumped to 120,000 yuan. But a 50-percent climb would be unbearable."

Many small businesses are currently suffering as the edge they had in terms of low labor costs when competing with overseas manufacturers, has mostly gone.

Zhuo Yongliang, director of the Development and Reform Research Institute of Zhejiang, said that it would be a long process for small enterprises to transform themselves from low-end producers to high-end ones, who have difficulties in raising salaries to hire workers, let alone investing in high technologies and innovation to upgrade their production.

"It's inevitable that a number of small enterprises will be eliminated. But we shouldn't ignore the unemployment problem," said Zhuo, who called for the authorities to help avoid a wave of bankruptcies of small firms.

Small firms struggle with labor shortage

About 34 percent among 2,407 surveyed small enterprises in Zhejiang were struggling to hire skilled workers or high-tech talents, according to a recent survey conducted by Alibaba Group.

Experts said, in order to avoid severe labor shortages during small firms' upgrading drive, the government should improve vocational training for rural surplus labors and vocational education.

"To prevent labor shortages from spreading, the government should guide jobless workers and equip them with skills, so that they can meet the requirements of upgrading enterprises," said Chen Shida, director of the Zhejiang Research Institute of Public Administration and Human Resources.