Labor relations in China
One of the hallmarks of China's socialist economy was its promise of employment to all able and willing to work and job-security with virtually lifelong tenure. Reformers targeted the labor market as unproductive because industries were frequently overstaffed to fulfill socialist goals and job-security reduced workers' incentive to work. This socialist policy was pejoratively called the iron rice bowl.
In 1979–1980, the state reformed factories by giving wage increases to workers, which was immediately offset by sharply rising inflation rates of 6%–7%. In other words, although they were given more pay, their money was worth less and they could buy less, which meant they were poorer. The state remedied this problem, in part, by distributing wage subsidies.
The reforms also dismantled the iron rice bowl, which meant it witnessed a rise in unemployment in the economy. In 1979, immediately after the iron rice bowl was dismantled, there were 20 million unemployed people. Official Chinese statistics reveal that 4.2% of the total urban workforce was unemployed in 2004, although other estimates have reached 10%. As part of its newly developing social security legislation, China has an unemployment insurance system. At the end of 2003, more than 103.7 million people were participating in the plan, and 7.4 million laid-off employees had received benefits.
A 10-percent sample tabulation of census questionnaires from the 1982 census provided needed statistical data on China's working population and allowed the first reliable estimates of the labor force's size and characteristics. The quality of the data was considered to be quite high, although a 40-million-person discrepancy existed between the 10-percent sample and the regular employment statistics. This discrepancy can be explained by the combination of inaccurate employment statistics and varying methods of calculation and scope of coverage. The estimated mid-1982 labor force was 546 million, or approximately 54 percent of the total population. Males accounted for slightly more than half of the estimated labor force, and the labor force participation rates for persons age fifteen years and older were among the highest in the world.
The 10-percent sample showed that approximately three-fourths of the labor force worked in the agricultural sector. According to the National Bureau of Statistics, in the mid-1980s more than 120 million people worked in the nonagricultural sector. The sample revealed that men occupied the great majority of leadership positions. The average worker was about thirty years old, and three out of every four workers were under forty-five years of age. The working population had a low education level. Less than 40 percent of the labor force had more than a primary school education, and 30 percent were illiterate or semiliterate.
In mid-1982 the overall unemployment rate was estimated to be about 5 percent. Of the approximately 25 million unemployed, 12 million were men and 13 million were women. The unemployment rate was highest in the northeast and lowest in the south. The unemployment rates were higher than those of East Asian, Southeast Asian, and Pacific island countries for which data were available but were lower than the rates found in North America and Europe. Virtually all of the unemployed persons in cities and towns were under twenty years of age.
By the 1990s and 2000s, agriculture has remained the largest employer, though its proportion of the workforce has steadily declined; between 1991 and 2001 it dropped from about 60% to 40% of the total. The manufacturing labor force has also become smaller at a slower rate, partially because of reforms implemented at many of the state-run enterprises. Such reforms and other factors have increased unemployment and underemployment in both urban and rural areas. Women have been a major labor presence in China since the People's Republic was established. Some 40–45 percent of all women over age 15 are employed.
China’s estimated employed labor force in 2005 totaled 791.4 million persons, about 60% of the total population. During 2003, 49% of the labor force worked in agriculture, forestry, and fishing; 22% in mining, manufacturing, energy, and construction industries; and 29% in the services sector and other categories. In 2004 some 25 million persons were employed by 743,000 private enterprises. Urban wages rose rapidly from 2004 to 2007, at a rate of 13 to 19% per year with average wages near $200/month in 2007.
Despite improvements in living standards, much of the labor force continues to work under horrendous conditions. As noted by Kenichi Ohmae:
“China exhibits capitalism in the rawest form. A factory manager in Guangzhou finds that the eyesight of some workers deteriorates as a result of the work they do. He fires them with one week’s pay. They are no longer his responsibility. Were a Japanese manager to act like this, he would risk imprisonment. Were a U.K. firm to do this, it might be both sued and prosecuted.”
All-China Federation of Trade Unions
The All-China Federation of Trade Unions (ACFTU) was established in 1925 to represent the interests of national and local trade unions and trade union councils. The ACFTU reported a membership of 130 million, out of an estimated 248 million urban workers, at the end of 2002. Chinese trade unions are organized on a broad industrial basis. Membership is open to those who rely on wages for the whole or a large part of their income, a qualification that excludes most agricultural workers. In theory, membership is not compulsory, but in view of the unions' role in the distribution of social benefits, the economic pressure to join is great. The lowest unit is the enterprise union committee. Individual trade unions also operate at the provincial level, and there are trade union councils that coordinate all union activities within a particular area and operate at county, municipal, and provincial levels. At the top of the movement is the ACFTU, which discharges its functions through a number of regional federations.
In theory the appropriate trade union organizations have been consulted on the level of wages as well as on wage differentials, but in practice their role in these and similar matters has been insignificant. They have not engaged in collective bargaining, as their principal duties have included assisting the party and promoting production. In fulfilling these tasks, they have had a role in enforcing labor discipline. From the point of view of the membership, the most important activities have concerned the social and welfare services. Thus, the unions have looked after industrial safety, organized social and cultural activities, and, provided services such as clinics, rest and holiday homes, hostels, libraries, and clubs. They also administer old-age pensions, workers' insurance, disability benefits, and other welfare schemes. More recently, however, reforms of the social security system have involved moving the responsibility for pensions and other welfare to the provinces.
In China there exist labor laws which, if fully enforced, would greatly alleviate common abuses such as not paying workers. In 2006, a new labor law was proposed and submitted for public comment. Enacted in 2008, the Labor Contract Law of the People's Republic of China permits collective bargaining in a form analogous to that standard in Western economies, although the only legal unions would continue to be those affiliated with the All-China Federation of Trade Unions, the Communist Party’s official union organization. The new law has support from labor activists, but was opposed by some foreign corporations, including the American Chamber of Commerce and the European Chamber of Commerce. There is some expectation that the law would be enforced. In 2010 a substantial increase in labor related cases brought to court in 2008 was reported. There has been many questions as to "Does the Labor Contract Law Cover Foreigners". There has recently been a case in Jinhua China (2011 - 2012), where a foreigner went through Labor Arbitration, Court and Court of Appeal. The case centered around Article 14 part 3 of the Labor Contract Law. During all the proceeding the Chinese argued that LAW did NOT apply to foreigners. The foreigner easily proved his case yet lost in all 3 venues. Both written court decisions cited that the foreigner did not meet the rule of Art 14 part 2 (which was NEVER argued by anyone in court(s)) and therefore the courts ruled against the foreigner. It is possible that this is an incident of some kind of court corruption but as of now this ruling and the far reaching international legal precedents that it sets remain in effect.
Reading from Documents of this case. Translation of the Arbitration Decision....
"This court thinks this case is a contract dispute about a foreigner who wants to obtain employment in china, the focus is about how to use Chinese law. The applicant thinks he has a working VISA and ‘foreign expert certificate’, that is his legal evidence to work in china, his working relationship with the respondent should apply to article 14.2’s rules of ‘the labor contract law of PRC.’ The respondent should sign an open-ended labor contract with him. This court thinks, ‘ the labor contract law of PRC.’ is a law that set to sign a labor contract, ‘the foreign experts employing contract management rules’ is a rule to the foreign expert who is working in China, these two law are all legal basis for foreign who works in china, and the latter was enacted after the former, it is clear, our country adopt specific rule different from its own citizens on the management issues with foreign experts, this case adopt ‘the foreign experts employing contract management rules’. This rule set: signing a foreign expert employment contract, should follow the principles of legal, fair, equality freewill, consensus and good faith. The article 4 of the rule set: the contract will automatically expired after the contract is finished. So, this court think, in this case the contract had already expired on 30th June 2011 which sign by both parties, and the respondent is not willing to resign again, this contract shall be terminated. The applicant ask for an open-ended contract with the respondent lack legal basis, this court will not support."
This decision shows a clear infringement on the rights of foreigners. It also makes use of a "rule" which is not issued by the State Council as "reason" to take away the rights of foreigners to the LCL. It is very clear in this decision that the worker is “legal” and has all the correct papers for employment at the time in question. A very critical issue is that it gives “right “ to the employer to decide not to enter into an open-ended contract even though the law is clearly written to allow the employee to be granted an open-ended contract if any of the conditions are met in Art 14 parts 1 -3 . If this way around the law stands it can now be used against both Foreigner and Chinese workers. Basically it is as if the courts in small town Jinhua China have in a single stroke nullified the Labor Contract Law that took over 10 years to create in a single stroke and have done this without direction from Beijing.
An ongoing effort to organize Chinese operations of foreign companies succeeded in 2006 at Wal-Mart. The campaign is projected to include Eastman Kodak, Dell and other companies. It was reported in 2008 that problems with sweatshops persist. By Fall, 2008 it was apparent that union organizing efforts were widespread with emphasis on foreign corporations.
Honda strikes and other events in 2010
In May, 2010 a strike was permitted to proceed against a Honda transmission and parts plant employing 1,900 in Foshan. The strike, which began on May 17, 2010, has resulted in suspension of operations at 4 Honda assembly plants. The main issue appears to be money with a substantial raise being demanded. Wages at the plant currently average $150 a month, a rate somewhat low for the area. The workers involved are mostly young high school and vocational school graduates with no apparent political agenda. A 24% wage increase was offered by Honda which for many workers would be an increase of about 366 renminbi ($54) a month. News reports on June 5, 2010 reported settlement of the strike with a pay raise of about 34% and other benefits giving workers at the plant a wage of about 300 dollars a month. A second strike, this time at an exhaust-systems plant, also in Foshan, followed. And a third, at a Honda lock plant in Zhongshan, where workers demanded the right to form an independent union. The strike at the Zhongshan was broken in a few days by a combination of concessions and hiring replacement workers.
On June 1, 2010 it was announced by Foxconn Technology Group, a major manufacturer of electronic products for export, that they would increase wages by 30%. For example, a worker previously paid 900 renminbi ($131.77) will be paid 1,200 renminbi effective immediately. Foxconn had been plagued by worker shortages and a number of worker suicides. A few days later a further increase was announced raising wages of employees who have worked for the company for three months to $294 a month. It is believed by economic experts such as Andy Xie that there is ample scope for increased wages in China due to its superior infrastructure as compared to competing low wage alternatives.
On June 18, 2010 there were news reports of strikes at two Toyota parts plants in Tianjin, both operated by a Chinese subsidiary Toyoda Gosei. On June 22, 2010 it was reported that a Toyota assembly plant had been closed due to a strike at a supplier.
Minimum wage increases and other events
Effective July 1, 2010 the minimum wage in Beijing was raised 20% to 960 renminbi ($140) a month. In Shenzhen the minimum wage will be increased to 1,100 renminbi, about $161 a month in July. In June, 2010 there were reports of several other incidents including one in which a government controlled ACFTU union was reported to be negotiating regarding wages with Kentucky Fried Chicken. On June 10, 2010 strikes were reported in 5 additional cities.
A copy-cat strike at a former state-owned, now privatized, textile factory in Pingdingshan, the Pingdingshan Cotton Textile Co., where workers with 20 years service toil for little more than $100 a month was reported on June 8, 2010 by The Toronto Star. According to the Star information about such strikes is not being publicized inside China as information about those involving foreign or Taiwanese owned factories is.
During the initial Honda strikes the media in China was permitted to report on them, but as strikes spread reporting was suppressed.
Workers at Tesco in the city of Jinhua, in Zhejiang province, which is due to close at the end of the year 2011, became concerned it would shut earlier after it began discounting goods. They asked management to pay them the overtime they were due and terminate their contracts so they would receive wages immediately, according to Zhejiang Online. The workers may have been alarmed by previous cases in China where bosses have closed businesses overnight and fled without paying workers. Workers feel that some will have no choice but to leave and argue they should be entitled to one month's pay for each year of employment, the compensation set out in redundancy laws. "Another major factor is that workers are much more determined to stand up for their rights and interests than five years ago … They are much more aware of what they are entitled to, not only legally, but what they feel they [need] to have a decent living for example. There's a higher sense of self-worth". More than 100 workers blockaded a Tesco in Jinhua. (source Zhejiang Online)
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- "Foxconn Raises Worker Pay 30%" article from Bloomberg News printed in The New York Times June 1, 2010
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- Text of the Labor Contract Law of the People's Republic of China includes supplementary materials